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A Model of a General Parimutuel System: Characterizations and Equilibrium Selection

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Author Info

  • Watanabe, Takahiro
  • Nonoyama, Hideyuki
  • Mori, Masao

Abstract

We formulate a model of a parimutuel system which considers a horse race with two horses. In our model, the raceholder offers a rate of his total betting revenue in the first stage. In the second stage each bettor simultaneously decides whether he bets one unit of money on one horse or he withdraws, according to his win predictions for each horse. We assume that all bettor's predictions are different and are common knowledge. We define some types of equilibria in the second stage game and give necessary and sufficient conditions for their existence. One equilibrium is a selected as a solution for the second stage game. We also define a solution for the whole game by using this result. Finally, we analyze the relation between the solution and variance for the bettor predictions.

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Bibliographic Info

Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 23 (1994)
Issue (Month): 3 ()
Pages: 237-60

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Handle: RePEc:spr:jogath:v:23:y:1994:i:3:p:237-60

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Web page: http://link.springer.de/link/service/journals/00182/index.htm

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Cited by:
  1. Frederic Koessler & Anthony Ziegelmeyer, 2004. "Parimutuel Betting under Asymmetric Information," Papers on Strategic Interaction 2003-34, Max Planck Institute of Economics, Strategic Interaction Group.
  2. Frédéric KOESSLER & Anthony ZIEGELMEYER & Marie-Hélène BROIHANNE, 2002. "The Favorite-Longshot Bias in Sequential parimutuel Betting with Non-Expected Utility Players," Working Papers of BETA 2002-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Feeney, R. & King, S.P., 2000. "Sequential Parimutuel Games," Department of Economics - Working Papers Series 736, The University of Melbourne.

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