The Construction of a Simple Book
A book is made for a horse race, and punters place their bets. The problem considered here is how the bookmaker should construct his book. Before this can be solved, it has to be determined how the punters will react to any proposed book. Much of the detailed discussion is confined to a race with two horses, though some results apply in the general case. The punters' problem is solved using a utility function, special attention being paid to the case of constant risk-aversion. Two solutions are provided for the bookmaker's problem, dependent on whether it is desired to maximize expected gain, or achieve the same gain whatever horse wins. Copyright 2000 by Kluwer Academic Publishers
When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:20:y:2000:i:2:p:119-40. 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: (Sonal Shukla)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.