Gamblers Learn from Experience

TL;DR

This study analyzes how mobile sports gamblers in Kenya learn from their betting outcomes, showing they adjust their behavior based on experience without increasing debt, using transaction data and Bayesian models.

Contribution

It provides empirical evidence that gamblers learn from experience and do not necessarily incur more debt, challenging concerns about gambling addiction in African mobile betting markets.

Findings

Gamblers reduce bets after poor results

Gamblers increase bets after good results

No evidence linking increased betting to higher debt

Abstract

Mobile phone-based sports betting has exploded in popularity in many African countries. Commentators worry that low-ability gamblers will not learn from experience, and may rely on debt to gamble. Using data on financial transactions for over 50 000 Kenyan smartphone users, we find that gamblers do learn from experience. Gamblers are less likely to bet following poor results and more likely to bet following good results. The reaction to positive and negative feedback is of equal magnitude and is consistent with a model of Bayesian updating. Using an instrumental variables strategy, we find no evidence that increased gambling leads to increased debt.