The house doesn’t always win: Evidence of anchoring among Australian bookies
AbstractWe examine Australian horseracing bookmakers’ responses to late scratches, instances in which a horse is abruptly withdrawn after betting has commenced. Our observed bookies exhibit anchoring on the original odds and fail to re-adjust odds fully on the remaining horses after a scratch, thereby earning lower profit margins and occasionally creating nominal arbitrage opportunities for bettors. We also examine which horses’ odds bookies adjust after a scratch and demonstrate diminished profit margins even after controlling for these endogenous adjustments. Our results indicate that bookies’ adjustments recover approximately 80% of lost profit margin but that bookies forgo the remaining 20% due to systematic under-adjustments.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 90 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/jebo
Anchoring bias; Behavioral economics; Fixed-odds wagering; Natural experiment;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D49 - Microeconomics - - Market Structure and Pricing - - - Other
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
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