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An Explanation of Optimal Each-Way Bets based on Non-Expected Utility Theory

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  • David A. Peel
  • Davind Law

Abstract

The purpose in this paper is to demonstrate how the non-expected utility models of Markowitz and Kahneman and Tversky can explain why an agent, chooses to bet each way on a horse. We also show that that appeal to moments of return, such as a preference for skewness of return, ceteris paribus, to explain the choice of the each way gamble over the single win gamble is, in general, invalid.

Suggested Citation

  • David A. Peel & Davind Law, 2009. "An Explanation of Optimal Each-Way Bets based on Non-Expected Utility Theory," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 3(2), pages 15-35, September.
    • Handle: RePEc:buc:jgbeco:v:3:y:2009:i:2:p:15-35
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    More about this item

    Keywords

    MARKOWITZ UTILITY FUNCTION; CUMULATIVE PROSPECT THEORY; EXPO-VALUE UTILITY FUNCTION; PROBABILITY DISTORTION; GAMBLING;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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