Information Cascades in Basketball and Sports Betting
With the recent start of the NBA season, it is easy to see how information cascades and gambling in any sport can be tied together. Especially with the NBA in the recent years, there is always one or two teams that dominate in popularity due to specific players being on the team, or just because the team itself is extremely skilled and predicted to win. This shift in popularity can be interpreted by the theory of information cascades.
As of right now, the most popular teams in terms of odds and gambling are of course, the Golden State Warriors, the Cleveland Cavaliers, San Antonio Spurs, and the Los Angeles Clippers. As of this week, the Warriors are at a value of (-110), the Cavaliers at (+300), Spurs at (+750) and the Clippers are (+750). The next team in line are valued are (+4000), a drastic increase. In American Sports odds, the odds value is describing how much the gambler will win on a $100 bet. Therefore, the odds of the Cavaliers being (+300) can be interpreted as a gambler receiving $3 for every $1 wagered. In terms of the negative for the Warriors, because they are a “super team” and regarded as a clear favorite to win, a gambler will have to wager $1.10 to win $1. However, what is most interesting about sports odds and gambling is how the odds of all the NBA top teams change game after game. The Los Angeles Clippers were valued at (+2500) just three weeks ago, but after they demolished another favorite team by over 20 points, The S.A. Spurs, their odds drastically dropped to (+750). This is because a spurge of fans shifted in loyalty, or hopped on the “bandwagon” of the Clippers and thought they would have a higher chance. This can clearly be argued to be due to information cascades. To bolster the effect of this, commentators and sports analyzers have a plethora of fans as well and influence fans by a simple “tweet” on twitter, or a comment on any social media outlet. The information cascades then spread and can easily be seen how the polls switch so frequently throughout the season.
The spreads, odds and ratios on the teams fluctuate earlier on in the season because fans are still unsure which team to place their bets on due to the low number of games. Therefore, as the season progresses, its interesting to see that the predictions and polls plateau because people are more certain. But still, they fluctuate from day to day, week to week and across the season. It’s interesting to examine this rationality under a closer lens because it also just seems like the most practical thing to do.
~http://www.intensegambling.com/sports-betting/
~http://www.oddsshark.com/nba/nba-futures