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Sequential Parimutuel Betting in the Laboratory

  • Anthony Ziegelmeyer

    ()

  • Marie-HÈlËne Broihanne

    ()

  • FrÈdÈric Koessler

    ()

This paper investigates parimutuel betting in the laboratory. Our experimental design relies on a simple sequential betting game where equilibrium strategies are characterized according to objective probabilities, the number of bettors, and publicly observable odds. The empirically well-documented phenomenon referred to as the "favorite-longshot bias" is observed in two of our three treatments. We offer a theoretical explanation of the subjects' behavior which relies on rank-dependent expected utility and pessimistic expectations about future bets.

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Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 28 (2004)
Issue (Month): 2 (03)
Pages: 165-186

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Handle: RePEc:kap:jrisku:v:28:y:2004:i:2:p:165-186
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100299

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