Do increased financial resources predict gambling behaviour - Large-scale evidence from Finnish online horserace betting?
Session Title
Session 3-3-E: Marketing and Consumer Behavior
Presentation Type
Paper Presentation
Location
Park MGM, Las Vegas, NV
Start Date
25-5-2023 1:30 PM
End Date
25-5-2023 3:00 PM
Disciplines
Behavioral Economics
Abstract
This paper investigates how a sharp change in liquidity is associated with betting behaviour and whether cognitive ability plays a role in these consumption choices. To do this, we analyse how IQ predicts betting behaviour around the payday (once in a month) and the tax refund day (once in a year), which provide a predictable increase in the consumer’s liquidity. We focus on workers (i.e., blue-collar and white-collar workers) because most bettors (68%) in the sample that includes a record of their IQ scores are in the labour force and thus, our empirical setting is are most relevant to them. We use a daily panel data set of online horse race bets made over a one-year period. We divide betting formats into four categories based on their complexity. We find that, on average, the payday predicts an increase of 13% in daily stakes and the tax refund day nearly a 40% increase in daily stakes for workers. We also find that on paydays low-IQ as opposed to high-IQ bettors are likely to stake more on the most complex betting formats (e.g., Pick 4 and Pick 65). Additionally, our intertemporal choice analyses of ‘the payday effect’ indicate that the daily stakes are nearly 10% lower on a day before the payday. As a result, our findings suggest that a change in financial resources play a significant role in betting behaviour.
Keywords
online gambling, horse race betting, empirical study, betting behaviour, payday effect, cognitive ability
Funding Sources
Academy of Finland (Grant #331102)
Competing Interests
No competing interests.
Do increased financial resources predict gambling behaviour - Large-scale evidence from Finnish online horserace betting?
Park MGM, Las Vegas, NV
This paper investigates how a sharp change in liquidity is associated with betting behaviour and whether cognitive ability plays a role in these consumption choices. To do this, we analyse how IQ predicts betting behaviour around the payday (once in a month) and the tax refund day (once in a year), which provide a predictable increase in the consumer’s liquidity. We focus on workers (i.e., blue-collar and white-collar workers) because most bettors (68%) in the sample that includes a record of their IQ scores are in the labour force and thus, our empirical setting is are most relevant to them. We use a daily panel data set of online horse race bets made over a one-year period. We divide betting formats into four categories based on their complexity. We find that, on average, the payday predicts an increase of 13% in daily stakes and the tax refund day nearly a 40% increase in daily stakes for workers. We also find that on paydays low-IQ as opposed to high-IQ bettors are likely to stake more on the most complex betting formats (e.g., Pick 4 and Pick 65). Additionally, our intertemporal choice analyses of ‘the payday effect’ indicate that the daily stakes are nearly 10% lower on a day before the payday. As a result, our findings suggest that a change in financial resources play a significant role in betting behaviour.