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Expected utility, skewness, and the baseball betting market

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  • Bill Woodland
  • Linda Woodland

Abstract

A subjective expected utility model is developed to explain the gambling behaviour of bettors on Major League Baseball games in the United States. Betting activity was examined over 15 seasons, for the period 1978 - 1992. The observed overbetting of favourite teams by baseball bettors can be reconciled without abandoning the traditional assumption of risk aversion. Additionally, there is some evidence to suggest that positive skewness has a discernible influence in the decision-making process for higher odds contests.

Suggested Citation

  • Bill Woodland & Linda Woodland, 1999. "Expected utility, skewness, and the baseball betting market," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 337-345.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:3:p:337-345
    DOI: 10.1080/000368499324327
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    References listed on IDEAS

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      • Herman O. Stekler & David Sendor & Richard Verlander, 2009. "Issues in Sports Forecasting," Working Papers 2009-002, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    2. Per Binde, 2005. "Gambling Across Cultures: Mapping Worldwide Occurrence and Learning from Ethnographic Comparison," International Gambling Studies, Taylor & Francis Journals, vol. 5(1), pages 1-27, June.
    3. Jennifer Brown & Dylan B. Minor, 2014. "Selecting the Best? Spillover and Shadows in Elimination Tournaments," Management Science, INFORMS, vol. 60(12), pages 3087-3102, December.
    4. Gunnarsson, Sara & Shogren, Jason F. & Cherry, Todd L., 2003. "Are preferences for skewness fixed or fungible?," Economics Letters, Elsevier, vol. 80(1), pages 113-121, July.
    5. Eric Cardella & Carl Kitchens, 2017. "The impact of award uncertainty on settlement negotiations," Experimental Economics, Springer;Economic Science Association, vol. 20(2), pages 333-367, June.
    6. Jen-Hung Wang & Larry Tzeng & Junji Tien, 2006. "Willingness to pay and the demand for lotto," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1207-1216.
    7. David Forrest & Ian Mchale, 2007. "Anyone for Tennis (Betting)?," The European Journal of Finance, Taylor & Francis Journals, vol. 13(8), pages 751-768.
    8. June Buchanan & Yun Shen, 2021. "Gambling and marketing: a systematic literature review using HistCite," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 2837-2851, June.
    9. Scott Tainsky & Jason Winfree, 2010. "Short-Run Demand and Uncertainty of Outcome in Major League Baseball," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(3), pages 197-214, November.

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