A widely documented empirical regularity in gambling markets is that bets on high probability events (a race won by a “favourite”) have higher expected returns than bets on low probability events (a “longshot” wins). Such favourite-longshot (FL) biases however appear to be more severe and persistent in bookmaker markets than in pari-mutuel markets; the latter sometimes exhibit no bias or a reverse FL bias. Our results help understand these differences: the odds grid in bookmaker markets leads to a built-in FL bias, whereas that used in pari-mutuel betting pushes these markets toward a reverse FL bias.
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Volume (Year): 2 (2008) Issue (Month): 2 (September) Pages: 29-50 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism
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