March Madness underdogs: People are riskier in gambles, forecasts made later in a sequence

New research suggests that those who get hit with the annual case of March Madness are more likely to take a chance on lower seeds for matchups they happen to fill out within their brackets later on, rather than first.

Jackie Silverman, assistant professor of marketing, co-authored a study in Management Science that found people are more risk seeking (more likely to predict a relatively improbable outcome) in their later forecasts and are thus more likely to make an incorrect prediction for them. For instance, individuals were more likely to bet that an “underdog” team will win in a sports tournament for predictions they made third, versus first, in a series of forecasts.

There can be negative consequences for this "prediction order effect"; by choosing the less likely option in these later predictions, people face greater chances of being wrong, which can reduce earnings and happiness.

These results are likely to extend beyond gambling to other cases where people must make multiple forecasts, including decisions made by investors (who must make several predictions of how stocks will perform) and managers (who must forecast potential employees' performance before making hiring decisions).

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