To better understand the rationality of emotional hedging, consider this simple example. Suppose an individual is willing to pay NOK 100 (€8.5) for IK Start to secure their league position that weekend. This is a measure of their willingness to pay (WTP) for the desired outcome. Conversely, suppose they would need at least NOK 1,000 to accept the prospect of IK Start failing to secure their league position. This is their willingness to accept (WTA) this undesired outcome. In this scenario, the market odds required to justify an emotional hedge would be the ratio of WTA to WTP, or 1,000/100 = 10. With actual market odds at 20, a rational emotional hedger could bet NOK 100. If the team secured their league position, they would lose the bet but gain the emotional satisfaction of the desired result. If the team failed, they would forgo the emotional benefit but receive NOK 2,000 – more than enough to compensate for the emotional loss. Thus, for an individual with such preferences, emotional hedging would be a rational choice.

Reflecting on my own preferences, I realized they did not justify an emotional hedging bet that weekend. However, I suspected that others might have preferences that could. Coincidentally, I had already planned a pre-game gathering in Oslo, where IK Start’s penultimate game was being held, where I invited 11 friends with varying degrees of emotional connection to the team. During the event, I conducted a short survey to measure their WTP for securing the league position that day, their WTA not securing it, and their self-reported level of emotional connection to IK Start on a 1-to-7 scale.

The stated WTPs are shown in Figure 1. Those who reported no emotional connection to the team had no WTP for the desired outcome. The most emotionally connected fan reported a WTP of only NOK 2. Among respondents with a moderate emotional connection (2 out of 7), all had positive WTPs ranging from NOK 33 to NOK 500. The more emotionally connected fans (5 out of 7) also had WTPs within this range.

The stated WTAs, illustrated in Figure 2, showed a similar pattern. Respondents with no emotional connection had no positive WTA, as they were indifferent to the team’s results. Among those emotionally affected by the team’s outcomes, WTAs were generally positive and correlated with emotional connection, though some highly connected fans reported relatively modest WTAs. Notably, one outlier – the superfan – reported a WTA of NOK 50,000, just shy of Norway’s median monthly pre-tax salary.

From these WTP and WTA values, I calculated the odds required to rationalize an emotional hedge for each individual (WTA/WTP). These are plotted in Figure 3, with respondents sorted by their self-reported emotional connection to IK Start. The findings suggest that only moderately connected fans had preferences aligning with the observed market odds. Non-fans had no emotional downside to hedge against, while highly connected fans required odds far higher than those offered by the market to compensate for the emotional cost of an undesirable outcome. Moderate fans, however, occupied a "sweet spot" where emotional hedging could be rational.

Based on this informal experiment, I hypothesize that emotional hedging can indeed be rational at observed betting market odds, particularly for moderately connected football fans. To test this hypothesis more rigorously, future research could investigate a larger, more representative sample of fans and consider additional contextual factors, such as the stakes of the game and the bettor’s socioeconomic background.

On that November Saturday, my primary goal was to advise those with rational preferences for emotional hedging to place such bets. I encouraged the moderate fans to hedge, arguing that this approach would maximize their expected happiness regardless of the game’s outcome. In the end, IK Start drew the match, securing their league position, and none of the moderate fans regretted their bets. To me, this outcome suggests that emotional hedging, when grounded in rational preferences, is a strategy worth considering – and one that merits further exploration.

References

Kossuth, L., Powdthavee, N., Harris, D., & Chater, N. (2020). Does it pay to bet on your favourite to win? Evidence on experienced utility from the 2018 FIFA World Cup experiment. Journal of Economic Behavior & Organization, 171, 35-58.

Morewedge, C. K., Tang, S., & Larrick, R. P. (2018). Betting your favorite to win: Costly reluctance to hedge desired outcomes. Management Science, 64(3), 997-1014.