Applying Diverse Cognitive Theories of Gambling to Daily Fantasy Sports Expenditures

Abstract: Researchers have proposed several theories in an attempt to explain the thought processes behind a gambler’s continued use of a gambling product. These include prospect theory (break even effect and house money effect), the availability heuristic, and the early big-win effect. While these theories have remained popular in conventional wisdom, they have undergone only limited empirical testing in natural gambling environments. Following a conceptual model for explaining weekly expenditures in online sports betting, we examine the individual effects of these theoretical processes on weekly expenditures in daily fantasy sports. We tracked the weekly betting behavior of three cohorts of subscribers to the website DraftKings. Using multi-level modeling, we examined the effects of players’ cumulative and recent (past-week) wins and losses on the total entry fees they place during a given week. We also examined the effect of experiencing an “early big-win” (defined as the largest quotients we derived from players’ biggest win and biggest entry fee during their first eight weeks of play) on weekly entry fees. Implications: Understanding the impacts of cognitive theories on daily fantasy sports behavior can help stakeholders to craft better responsible gambling policies for daily fantasy sports players. Future research can also examine whether certain cognitive processes are associated with development of gambling-related problems