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An Explanation of Inefficiencies in the Pelota Betting Market: Rank Dependent Expected Utility


  • Loreto Llorente

    (Universidad Publica de Navarra, Campus Arrosadia)


In Pelota matches, games with two mutually exclusive and exhaustive outcomes, bets on the winner are made through a middleman who receives 16% of the finally paid amount. The classical decision theory of expected utility maximization can not explain this market assuming bettors are identical. Llorente and Aizpurua (2007) explain the existence of bets in the market under Quiggin's rank dependent expected utility (RDEU) model. They find that bettors have to be optimistic in order to explain the existence of a bet. Analyzing the way odds are fixed in the market Llorente (2006) finds that assuming equal return on bets there are inefficiencies in the market. In this paper we show that, given an assumption that bettors are rank dependent expected utility maximizers, these inefficiencies tend to disappear.

Suggested Citation

  • Loreto Llorente, 2007. "An Explanation of Inefficiencies in the Pelota Betting Market: Rank Dependent Expected Utility," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 1(2), pages 147-163, June.
  • Handle: RePEc:buc:jgbeco:v:1:y:2007:i:2:p:147-163

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    References listed on IDEAS

    1. John J. Siegfried & Andrew Zimbalist, 2000. "The Economics of Sports Facilities and Their Communities," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 95-114, Summer.
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    7. Dennis Coates & Brad R. Humphreys, 2001. "The Economic Consequences of Professional Sports Strikes and Lockouts," Southern Economic Journal, Southern Economic Association, vol. 67(3), pages 737-747, January.
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    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism


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