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Sequential Parimutuel Games

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Author Info
Feeney, R.
King, S.P.

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Abstract

In a parimutuel betting system, a successful player's return depends on the number of players who choose the same action. This paper examines a general solution for two-action sequential parimutuel games, and shows how the (unique) equilibrium of such games leads to a simple pattern of behaviour. In particular, we show that there is an advantage to being an early mover, that early players might choose actions with an ex ante low probability of success, and that player action choices can 'flip' with small changes in the parameters of the game.

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File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp00_01/736.pdf
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Publisher Info
Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 736.

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Length: 12 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:mlb:wpaper:736

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Related research
Keywords: GAME THEORY ; INVESTMENTS;

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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.:

  1. Hamid, Shahid S & Prakash, Arun J & Smyser, Michael W, 1996. "Marginal Risk Aversion and Preferences in a Betting Market," Applied Economics, Taylor and Francis Journals, vol. 28(3), pages 371-76, March. [Downloadable!] (restricted)
  2. Potters, J. & Wit, J., 1996. "Bets and bids : favorite-longshot bias and winner's curse," Discussion Paper 4, Tilburg University, Center for Economic Research. [Downloadable!]
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  3. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  4. 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.
  5. Chadha, Sumir & Quandt, Richard E, 1996. "Betting Bias and Market Equilibrium in Racetrack Betting," Applied Financial Economics, Taylor and Francis Journals, vol. 6(3), pages 287-92, June. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. 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, ULP, Strasbourg. [Downloadable!]
    Other versions:
  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. [Downloadable!]
    Other versions:
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