Racetrack betting and consensus of subjective probabilities
In this paper we consider the dynamic process of race track betting. We show that there is a close connection between the dynamic race track betting process and the pari-mutuel method for constructing consensus of subjective probabilities considered in Eisenberg and Gale. This enables us to show that there exists a unique equilibrium point for the betting process. We further show that the dynamic betting process converges to this equilibrium point almost surely. Therefore the sequential race track betting gives a natural approach to inducing the consensus probabilities in Eisenberg and Gale. These consensus probabilities are different from the average of the subjective probabilities which is used in the conventional way of combining individually held opinions into a collective group statement. We compare these probabilities and this leads to a potential explanation of the favorite-longshot bias consistently observed in the studies of race track betting.
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): 62 (2003)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
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.:
- Ali, Mukhtar M, 1977. "Probability and Utility Estimates for Racetrack Bettors," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 803-15, August.
- Asch, Peter & Malkiel, Burton G. & Quandt, Richard E., 1982. "Racetrack betting and informed behavior," Journal of Financial Economics, Elsevier, vol. 10(2), pages 187-194, July.
- Busche, Kelly & Hall, Christopher D, 1988. "An Exception to the Risk Preference Anomaly," The Journal of Business, University of Chicago Press, vol. 61(3), pages 337-46, July.
- Weitzman, Martin L., 1965. "Utility Analysis and Group Behavior: An Empirical Study," Scholarly Articles 3710799, Harvard University Department of Economics.
- Donald B. Hausch & William T. Ziemba & Mark Rubinstein, 1981. "Efficiency of the Market for Racetrack Betting," Management Science, INFORMS, vol. 27(12), pages 1435-1452, December.
When requesting a correction, please mention this item's handle: RePEc:eee:stapro:v:62:y:2003:i:2:p:175-187. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.