The house doesn’t always win: Evidence of anchoring among Australian bookies
We examine Australian horseracing bookmakers’ responses to late scratches, instances in which a horse is abruptly withdrawn after betting has commenced. Our observed bookies exhibit anchoring on the original odds and fail to re-adjust odds fully on the remaining horses after a scratch, thereby earning lower profit margins and occasionally creating nominal arbitrage opportunities for bettors. We also examine which horses’ odds bookies adjust after a scratch and demonstrate diminished profit margins even after controlling for these endogenous adjustments. Our results indicate that bookies’ adjustments recover approximately 80% of lost profit margin but that bookies forgo the remaining 20% due to systematic under-adjustments.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 90 (2013)
Issue (Month): C ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/jebo|
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.:
- Jonathan E. Alevy & Craig E. Landry & John A. List, 2011.
"Field Experiments on Anchoring of Economic Valuations,"
2011-02, University of Alaska Anchorage, Department of Economics.
- Jonathan Alevy & Craig Landry & John List, 2015. "Field Experiments on Anchoring of Economic Valuations," Framed Field Experiments 00454, The Field Experiments Website.
- Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Long Shot Bias: Is it Risk-Love or Misperceptions?," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 723-746, 08.
- Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?," NBER Working Papers 15923, National Bureau of Economic Research, Inc.
- Snowberg, Erik & Wolfers, Justin, 2010. "Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?," IZA Discussion Papers 4884, Institute for the Study of Labor (IZA).
- Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?," CESifo Working Paper Series 3029, CESifo Group Munich.
- Snowberg, Erik & Wolfers, Justin, 2010. "Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?," CEPR Discussion Papers 7801, C.E.P.R. Discussion Papers.
- Ali, Mukhtar M, 1977. "Probability and Utility Estimates for Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 803-815, August.
- Alan Beggs & Kathryn Graddy, 2009. "Anchoring Effects: Evidence from Art Auctions," American Economic Review, American Economic Association, vol. 99(3), pages 1027-1039, June.
- Anna Dodonova & Yuri Khoroshilov, 2004. "Anchoring and transaction utility: evidence from on-line auctions," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 307-310.
- Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
- Shin, Hyun Song, 1991. "Optimal Betting Odds against Insider Traders," Economic Journal, Royal Economic Society, vol. 101(408), pages 1179-1185, September.
- Shin, Hyun Song, 1993. "Measuring the Incidence of Insider Trading in a Market for State-Contingent Claims," Economic Journal, Royal Economic Society, vol. 103(420), pages 1141-1153, September.
- Markku Kaustia & Eeva Alho & Vesa Puttonen, 2008. "How Much Does Expertise Reduce Behavioral Biases? The Case of Anchoring Effects in Stock Return Estimates," Financial Management, Financial Management Association International, vol. 37(3), pages 391-412, 09.
- Marco Ottaviani & Peter Norman Sorensen, 2010. "Noise, Information, and the Favorite-Longshot Bias in Parimutuel Predictions," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 58-85, February.
- Michael Cain & David Law & David Peel, 2003. "The Favourite-Longshot Bias, Bookmaker Margins and Insider Trading in a Variety of Betting Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 263-273, 07.
- Hyun Song Shin, 2008. "Prices Of State Contingent Claims With Insider Traders, And The Favourite-Longshot Bias," World Scientific Book Chapters,in: Efficiency Of Racetrack Betting Markets, chapter 34, pages 343-352 World Scientific Publishing Co. Pte. Ltd..
- Shin, Hyun Song, 1992. "Prices of State Contingent Claims with Insider Traders, and the Favourite-Longshot Bias," Economic Journal, Royal Economic Society, vol. 102(411), pages 426-435, March.
- Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
- Steven Levitt & John List, 2007. "What do Laboratory Experiments Measuring Social Preferences Reveal About the Real World," Artefactual Field Experiments 00480, The Field Experiments Website.
- Northcraft, Gregory B. & Neale, Margaret A., 1987. "Experts, amateurs, and real estate: An anchoring-and-adjustment perspective on property pricing decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(1), pages 84-97, February.
- Bentley Coffey & M. T. Maloney, 2010. "The Thrill of Victory: Measuring the Incentive to Win," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 87-112, 01. Full references (including those not matched with items on IDEAS)