Unfair Games, Subjective Probabilities, and Favourite-Longshot Bias in Finnish Horse Racing
This paper discusses risky and uncertain decision-making in the framework of gambling. The well-known anomaly of favourite-longshot bias is considered. We argue that gambling behaviour can be seen as consumption. Thus, gambling behaviour is more than a risky choice. It is reasonable to assume that the price of gambling is the take-out rate or the expected loss. We illustrate, with some elementary gambling, that the gambling markets constitute an environment where risky choices can be measured only with probabilities. Typical gambling behaviour (e.g. horse betting) is modelled by an approach that includes the attractiveness of risk, subjective probability, and the utility of money. We tested the favourite-longshot bias with a large accumulated dataset from Finnish horse race tracks that monitored more than 27,000 races over a five-year period. The empirical results indicate that Finnish gamblers' behaviour is biased: they gamble too little on favourites and too much on longshots. Our results confirm the universality of the favourite-longshot bias that can be found in Western Europe, Australia and the USA.
Volume (Year): 4 (2010)
Issue (Month): 2 (September)
|Contact details of provider:|| Web page: http://www.ubpl.co.uk/|
|Order Information:|| Web: http://www.jgbe.com/index_files/Page492.htm Email: |
When requesting a correction, please mention this item's handle: RePEc:buc:jgbeco:v:4:y:2010:i:2:p:43-61. 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: (Victor Matheson, College of the Holy Cross)
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.