Advanced Search
MyIDEAS: Login to save this paper or follow this series

Parimutuel Betting under Asymmetric Information

Contents:

Author Info

  • Frederic Koessler
  • Charles Noussair
  • Anthony Ziegelmeyer

    ()

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2006-05.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2006-05.

as in new window
Length: 18 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:esi:discus:2006-05

Contact details of provider:
Postal: Kahlaische Strasse 10, D-07745 Jena
Phone: +49-3641-68 65
Fax: +49-3641-68 69 90
Web page: http://www.econ.mpg.de/
More information through EDIRC

Order Information:
Email:
Web: http://www.econ.mpg.de/english/research/ESI/discuss.php

Related research

Keywords: Parimutuel betting; Asymmetric information; Information aggregation; Herd behavior; Contrarian behavior;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ottaviani, Marco & Sorensen, Peter Norman, 2003. "Late Informed Betting and the Favourite-Longshot Bias," CEPR Discussion Papers 4092, C.E.P.R. Discussion Papers.
  2. Frederic Koessler & Anthony Ziegelmeyer, 2004. "Parimutuel Betting under Asymmetric Information," Papers on Strategic Interaction 2003-34, Max Planck Institute of Economics, Strategic Interaction Group.
  3. Timothy Feddersen & Wolfgang Pesendorfer, 1996. "Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts," Discussion Papers 1170, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Takahiro, Watanabe, 1997. "A parimutuel system with two horses and a continuum of bettors," Journal of Mathematical Economics, Elsevier, vol. 28(1), pages 85-100, August.
  5. Corsetti, Giancarlo & Dasgupta, Amil & Morris, Stephen & Shin, Hyun Song, 2000. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," CEPR Discussion Papers 2610, C.E.P.R. Discussion Papers.
  6. Avery, Christopher & Zemsky, Peter, 1998. "Multidimensional Uncertainty and Herd Behavior in Financial Markets," American Economic Review, American Economic Association, vol. 88(4), pages 724-48, September.
  7. Frederic Koessler & Charles Noussair & Anthony Ziegelmeyer, 2007. "Information Aggregation and Beliefs in Experimental Parimutuel Betting Markets," Jena Economic Research Papers 2007-033, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  8. Feeney, Rob & King, Stephen P., 2001. "Sequential parimutuel games," Economics Letters, Elsevier, vol. 72(2), pages 165-173, August.
  9. Charles R. Plott & Jorgen Wit & Winston C. Yang, 2003. "Parimutuel betting markets as information aggregation devices: experimental results," Economic Theory, Springer, vol. 22(2), pages 311-351, 09.
  10. Jeffrey Lange & Nicholas Economides, 2001. "A Parimutuel Market Microstructure for Contingent Claims Trading," Working Papers 01-13, New York University, Leonard N. Stern School of Business, Department of Economics.
  11. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  12. Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
  13. Terrell, Dek & Farmer, Amy, 1996. "Optimal Betting and Efficiency in Parimutuel Betting Markets with Information Costs," Economic Journal, Royal Economic Society, vol. 106(437), pages 846-68, July.
  14. Amil Dasgupta, 2000. "Social Learning with Payoff Complementarities," Econometric Society World Congress 2000 Contributed Papers 0322, Econometric Society.
  15. Hurley, William & McDonough, Lawrence, 1995. "A Note on the Hayek Hypothesis and the Favorite-Longshot Bias in Parimutuel Betting," American Economic Review, American Economic Association, vol. 85(4), pages 949-55, September.
  16. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September.
  17. 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.
  18. Marco Ottaviani & Peter Norman Sørensen, 2004. "The Timing of Bets and the Favorite-Longshot Bias," FRU Working Papers 2004/12, University of Copenhagen. Department of Economics. Finance Research Unit.
  19. Frederic Koessler & Ch. Noussair & A. Ziegelmeyer, 2005. "Individual Behavior and Beliefs in Experimental Parimutuel Betting Markets," THEMA Working Papers 2005-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  20. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  21. Dekel, E. & Piccione, M., 1999. "Sequential Voting Procedures in Symmetric Binary Elections," Papers 3-99, Tel Aviv.
  22. Vaughan Williams, Leighton, 1999. "Information Efficiency in Betting Markets: A Survey," Bulletin of Economic Research, Wiley Blackwell, vol. 51(1), pages 1-30, January.
  23. Watanabe, Takahiro & Nonoyama, Hideyuki & Mori, Masao, 1994. "A Model of a General Parimutuel System: Characterizations and Equilibrium Selection," International Journal of Game Theory, Springer, vol. 23(3), pages 237-60.
  24. Brunnermeier, Markus K., 2001. "Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding," OUP Catalogue, Oxford University Press, number 9780198296980, September.
  25. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  26. Anthony Ziegelmeyer & Marie-HÈlËne Broihanne & FrÈdÈric Koessler, 2004. "Sequential Parimutuel Betting in the Laboratory," Journal of Risk and Uncertainty, Springer, vol. 28(2), pages 165-186, 03.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Koessler, Frédéric & Noussair, Charles & Ziegelmeyer, Anthony, 2008. "Parimutuel betting under asymmetric information," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 733-744, July.
  2. Ottaviani, Marco & Sorensen, Peter Norman, 2003. "Late Informed Betting and the Favourite-Longshot Bias," CEPR Discussion Papers 4092, C.E.P.R. Discussion Papers.
  3. Estelle Dhont-Peltrault & Etienne Pfister, 2007. "R&D cooperation versus R&D subcontracting: empirical evidence from French survey data," Working Papers of BETA 2007-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  4. Meixing DAI & Moïse SIDIROPOULOS & Eleftherios SPYROMITROS, 2007. "La transparence de la politique monétaire et la dynamique des marchés financiers," Working Papers of BETA 2007-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. 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 2007-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  6. Frédéric Koessler & Charles Noussair & Anthony Ziegelmeyer, 2007. "Information Aggregation and Beliefs in Experimental Parimutuel Betting Markets," Papers on Strategic Interaction 2005-12, Max Planck Institute of Economics, Strategic Interaction Group.
  7. Nicolas Carayol & Pascale Roux, 2006. "A strategic model of complex networks formation," Working Papers of BETA 2006-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  8. Jalal EL OUARDIGHI & Rabija SOMUN-KAPETANOVIC, 2006. "Convergence des contributions aux inégalités de richesse dans le développement des pays européens," Working Papers of BETA 2006-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  9. Erik Eyster & Andrea Galeotti & Navin Kartik & Matthew Rabin, 2012. "Congested Observational Learning," Economics Discussion Papers 706, University of Essex, Department of Economics.
  10. 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 2005-11, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  11. Rachel Levy & Paul Muller, 2006. "Do academic laboratories correspond to scientific communities? Evidence from a large European university," Working Papers of BETA 2006-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  12. 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 2005-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  13. Meixing DAI, 2007. "A two-pillar strategy to keep inflation expectations at bay: A basic theoretical framework," Working Papers of BETA 2007-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  14. Gisèle Umbhauer, 2007. "De l’amiante au chrysotile, un glissement stratégique dans la désinformation," Working Papers of BETA 2007-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  15. Tapas K. Mishra, 2006. "A Further Look into the Demography-based GDP Forecasting Method," Working Papers of BETA 2006-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  16. Nicolas Carayol & Pascale Roux & Murat Yıldızoglu, 2006. "Coordination failures in network formation," Working Papers of BETA 2006-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  17. Frederic Koessler & Ch. Noussair & A. Ziegelmeyer, 2005. "Individual Behavior and Beliefs in Experimental Parimutuel Betting Markets," THEMA Working Papers 2005-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  18. Koessler, Frédéric & Noussair, Charles & Ziegelmeyer, Anthony, 2012. "Information aggregation and belief elicitation in experimental parimutuel betting markets," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 195-208.
  19. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:esi:discus:2006-05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karin Richter).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.