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Parimutuel betting under asymmetric information

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  • Koessler, Frédéric
  • Noussair, Charles
  • Ziegelmeyer, Anthony

Abstract

This paper examines simple parimutuel betting games under asymmetric information, with particular attention to differences between markets in which bets are submitted simultaneously versus sequentially. In the simultaneous parimutuel betting market, all (symmetric and asymmetric) Bayesian-Nash equilibria are generically characterized as a function of the number of bettors and the quality of their private information. There always exists a separating equilibrium, in which all bettors follow their private signals. This equilibrium is unique if the number of bettors is sufficiently large. In the sequential framework, earlier bets have information externalities, because they may reveal private information of bettors. They also have payoff externalities, because they affect the betting odds. One effect of these externalities is that the separating equilibrium disappears if the number of betting periods is sufficiently large.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 44 (2008)
Issue (Month): 7-8 (July)
Pages: 733-744

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Handle: RePEc:eee:mateco:v:44:y:2008:i:7-8:p:733-744

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Cited by:
  1. Erik Eyster & Andrea Galeotti & Navin Kartik & Matthew Rabin, 2012. "Congested Observational Learning," Economics Discussion Papers, University of Essex, Department of Economics 706, University of Essex, Department of Economics.
  2. Frederic Koessler & Anthony Ziegelmeyer, 2004. "Parimutuel Betting under Asymmetric Information," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2003-34, Max Planck Institute of Economics, Strategic Interaction Group.
  3. Nicolas Carayol & Pascale Roux, 2006. "A strategic model of complex networks formation," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2006-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  4. Stéphane Betrand & Kene Boun My & Alban Verchère, 2005. "Faire émerger la coopération internationale : une approche expérimentale comparée du bilatéralisme et du multilatéralisme," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2005-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. Meixing DAI & Moïse SIDIROPOULOS & Eleftherios SPYROMITROS, 2007. "La transparence de la politique monétaire et la dynamique des marchés financiers," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2007-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  6. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  7. Jalal EL OUARDIGHI & Rabija SOMUN-KAPETANOVIC, 2006. "Convergence des contributions aux inégalités de richesse dans le développement des pays européens," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2006-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  8. Rachel Levy & Paul Muller, 2006. "Do academic laboratories correspond to scientific communities? Evidence from a large European university," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2006-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  9. Sofia Pessoa e Costa & Stéphane Robin, 2007. "The Impact Of Training Programmes On Wages In France: An Evaluation Of The “Qualifying Contract” Using Propensity Scores," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2007-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  10. Marco Ottaviani & Peter Norman Sørensen, 2003. "Late Informed Betting and the Favorite-Longshot Bias," Discussion Papers, University of Copenhagen. Department of Economics 03-33, University of Copenhagen. Department of Economics.
  11. Frederic Koessler & Ch. Noussair & A. Ziegelmeyer, 2005. "Individual Behavior and Beliefs in Experimental Parimutuel Betting Markets," THEMA Working Papers, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise 2005-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  12. Giovanni Dosi & Patrick Llerena & Mauro Sylos Labin, 2005. "Science-Technology-Industry Links and the ”European Paradox”: Some Notes on the Dynamics of Scientific and Technological Research in Europe," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2005-11, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  13. Nicolas Carayol & Pascale Roux & Murat Yıldızoglu, 2006. "Coordination failures in network formation," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2006-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  14. Tapas K. Mishra, 2006. "A Further Look into the Demography-based GDP Forecasting Method," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2006-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  15. Koessler, Frédéric & Noussair, Charles & Ziegelmeyer, Anthony, 2012. "Information aggregation and belief elicitation in experimental parimutuel betting markets," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 83(2), pages 195-208.
  16. Meixing DAI, 2007. "A two-pillar strategy to keep inflation expectations at bay: A basic theoretical framework," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2007-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  17. Estelle Dhont-Peltrault & Etienne Pfister, 2007. "R&D cooperation versus R&D subcontracting: empirical evidence from French survey data," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2007-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  18. Frédéric Koessler & Charles Noussair & Anthony Ziegelmeyer, 2007. "Information Aggregation and Beliefs in Experimental Parimutuel Betting Markets," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2005-12, Max Planck Institute of Economics, Strategic Interaction Group.
  19. Gisèle Umbhauer, 2007. "De l’amiante au chrysotile, un glissement stratégique dans la désinformation," Working Papers of BETA, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg 2007-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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