In terms of betting, the Super Bowl is one of the most popular events in the world. Sports books, as well as trading markets like TradeSports that operate like betting markets, offer a wide variety of bets/contracts on the Super Bowl. I like to follow the trading of contracts on TradeSports in real time for large handle events like the Super Bowl to see how markets interpret the information that is revealed on the field. While surfing around the TradeSports web site before the game, I noticed among the “proposition” contracts offered was a contract on the Super Bowl coin toss coming up heads. Based on the volume of trades, this was the most popular Super Bowl proposition bet on TradeSports, and based on other web sites, proposition bets on the Super Bowl coin toss are one of the most popular Super Bowl prop bets.
This distribution is interesting, to say the least. The mean price was 50.33 and the median 50.35. Why would anyone pay more than 50 for a contract with an expected value of 50? Of the 85 transactions, 52 of them took place at a price greater than 50. Those two trades at 52, which are the equivalent of betting $5.20 for a 50% chance of winning $10, both came minutes before the coin toss.
There are several possible explanations for why we would observe prices not equal to 50 in this market. Risk seeking in the Friedman-Savage sense, consumption benefits from gambling, and a number of Kahneman-Tversky type heuristic decision rules immediately come to mind. FYI, in 42 Super Bowl coin tosses heads has come up 20 times and tails has come up 22 times. I was unable to locate a year-by-year list of outcomes, so we can’t determine if there is a “hot hand” in Super Bowl coin tosses.