Ivory Towers: Decisions, decisions: a gambler's guide

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The Independent Online
YESTERDAY, the Ninth International Conference on Risk and Gambling opened, appropriately enough, in Las Vegas, where contributors include David Spanier, our Poker Correspondent, and Johnnie Johnson and Alistair Bruce, who were featured in this column a couple of months ago. On that occasion, the topic of interest was whether it is good advice to bet on the favourite in the last race (on the whole, the evidence did not support this belief).

At Las Vegas, Johnson and Bruce will present a paper: 'Complexity and Decision-Making: An Empirical Investigation', which again uses punters' behaviour at the race-track to investigate decision-making under conditions of complexity and uncertainty.

The basis of the research is a statistical analysis of 1,161 randomly selected betting slips issued during 1987 at off-course betting offices in the UK. A sizeable amount of previous research had cast doubt on the rationality of decisions taken under uncertain and complex conditions. As the amount of information available grows, 'decision-makers appear to resort to simplifying strategies to increase the manageability of large information sets'.

Horse-races offer a useful setting within which to test theories of decision-making. Complexity increases with the number of runners, and there is also the question of handicapping. In a handicap race, weights are assigned to each horse, on the basis of its past record, with the intention of equalising differences and producing a close contest. So a handicap race offers increased complexity: the bettor's judgement must be based not only on past form but on the handicap too.

The paper tests two hypotheses:

1: Decision complexity inhibits participation in decision-making.

2: Decision performance deteriorates as complexity increases.

In other words, people will be less likely to bet on handicap races or races with large fields, and they will lose more money if they do bet on such races.

Analysis of the data, however, showed that significantly more bets were placed on races with large fields, with no difference between handicap and non-handicap races. 'In interpreting these results, it should of course be noted that the bets recorded are made by individuals who choose to engage in risky decision-making as a pastime, so that they may be less sensitive to the uncertainties of task complexity than those who choose not to engage in such activity.'

While bets were more often successful in small fields (as was to be expected from purely probabilistic considerations), there was little evidence to suggest that bettors' rewards were related to the complexity of the problem. The results 'fail to offer a consistent basis for accepting Hypothesis 2'.

'Perhaps surprisingly,' they conclude, 'individual bettors appear untroubled by the prospect of engaging in highly complex decision problems.' While they dare not even whisper it in Las Vegas, these figures could be taken to support an alternative hypothesis: betting is a mugs' game.

With thanks to Johnnie Johnson and the Centre for Risk Research at Southampton University.