Information Cascades and Sports
In Sports, before a season starts, people will often choose their favorite picks to win the championship that season. Not only will they choose their favorite teams, but they will also look at what the experts have to say. Experts set odds based on the current state of each team, how they performed the season before, as well as their future outlook. For example, at the beginning of the NBA season this year, the Warriors were clearly the favorite due to their offseason signing of Kevin Durant, who is one of the best players in the NBA. The NFL favorite at the beginning of the season was the Carolina Panthers, and the MLB was the Cubs. However, sports are very unpredictable, and the majority of the time, the favorite does not win the championship. That is where the notion of information cascades come in. An information cascade is where people will often abandon their own opinions in favor of what has previously occurred.
This notion can be easily seen as a sports season progresses. Take the NFL as an example. As stated above, the Panthers were the favorite coming into the season, however they lost 5 out of their first 6 games, and completely dropped off. Their odds started at +800, and are now currently sitting at +5000. The New York Giants on the other hand began the season with odds of +4250, and now sit at +2000 after starting the season with a record of 8-3. While a team’s play can be thought of as information, that is not the only thing that can affect what others choose to believe.
Information cascade is accurately described as people’s choices being influence due to the information that others have. In Sports today, there are hundreds of “experts” that appear on TV and social media. These experts are thought to contain knowledge that fans do not. This knowledge could be lineup changes, injury reports, or just who they think will win, but it instantly can change fans opinions and influence who they will bet on not only on a weekly basis, but also down the road. Fans’ choices are easily influenced by experts because fans want nothing more than to be right and make money, thus any information they can gain will form a large part of their decision. This is a large information cascade.
All in all, sports is an industry where it is very easy to see how information plays a large role in decision making. Even though the odds may be set, they are never truly finalized due to the never ending stream of information that can come. Throughout the season bets are changing and odds are increasing and decreasing. Fans are changing their decisions due to “expert” opinion and information that they have no other access too. The ability of experts and teams in general to provide information to influence decision is what makes the sports industry a great example of an information cascade.
Source: http://www.oddsshark.com/super-bowl/futures