This project studies how social identity distorts both what people believe and what they prefer, using field experiments with soccer fans betting on their own team versus other matches.
Supporters overestimate their team's chances and shy away from profiting when their team loses; the project separates how much of this behavior is driven by biased beliefs versus identity-driven preferences.
Group identity is known to distort economic decisions, but it is unclear how much of the distortion reflects biased beliefs and how much reflects genuinely different preferences. We provide a joint decomposition of these two channels in an investment context.
In framed field experiments with Kenyan and UK soccer fans during the 2021/22 Premier League season, we elicited fans' subjective probabilities and incentivized bets on matches involving their supported team and on otherwise similar matches where they were neutral.
Supporters overestimate their own team's win probability by 10-18 percent and allocate about 20 percent more of their budget to bets on their own team. Embedding these patterns in a portfolio-choice model shows that distorted beliefs explain 30-44 percent of this excess investment, while the remaining 56-70 percent reflects an aversion to profiting when one's own team loses — equivalent to valuing such gains 17-27 percent less. This aversion to ‘disloyal’ gains is stronger when a supporter's team is performing poorly.
The results imply welfare losses from identity-driven distortions of roughly 0.5-2.7 percent of betting budgets, and show that correcting misperceptions alone would not eliminate identity-driven distortions in investment decisions, since a substantial share is rooted in preferences rather than beliefs.
Working paper
