## The Behavioural Economics of Staking
Stake sizing should be a mathematical exercise: edge, odds, bankroll → optimal stake. In practice, human psychology systematically distorts this calculation in predictable ways.
## Distortion 1: Loss Aversion Increasing Stakes
After a losing run, the emotional drive to "get back" causes bettors to increase stakes. This is the opposite of what Kelly recommends (smaller stakes after losing, as bankroll shrinks). The psychological response worsens the situation by adding additional financial risk.
## Distortion 2: Overconfidence Scaling
Bettors increase stakes on selections they feel most confident about — even when that confidence is not backed by a better probability estimate. "This is a certainty" leads to 3× normal stakes on a bet that, analytically, may have no more edge than a 1× stake bet.
## Distortion 3: Hot Hand Fallacy
After a winning run, many bettors increase stakes, believing they are "in form." In reality, a winning run provides no information about future outcomes if the underlying edge is constant. Hot-hand thinking inflates stakes precisely when the risk of a normalising run is highest.
## Distortion 4: The Small Stake Illusion
Very small stakes relative to bankroll (0.1% or less) feel "safe" and lead bettors to place too many bets without rigorous analysis. The logic: "It's only £2, who cares?" The cumulative effect of many such bets — each with negative EV — is a consistent drain on the bankroll.
## The Solution: Pre-Commitment
The most effective behavioural protection is pre-committing to a staking strategy before the betting session begins. Write the stake for each planned bet before the event starts. Do not modify the stake in response to feelings during the session.
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