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Gamblers' Rationality in Parimutuel Soccer Betting

Listed author(s):
  • Hauser, Ursula

    (Institute for Advanced Studies, Vienna)

  • Koenig, Ulrich

    (Department of Economics, University of Vienna)

  • Krylova, Elizaveta

    (Institute for Advanced Studies, Vienna)

Registered author(s):

    A model for strategic behaviour in parimutuel gambles with unequal winning-probabilities is developed and applied to gambles based on soccer results. Assuming that the bookmakers' quotas reflect the true probability of each possible result of a soccer game, we are able to derive a formula for the expected payoff of a betting strategy (Tipp). Using recent (1996-99) data from the Austrian games Toto and Torwette we are able to calculate the optimal strategies for 90 Toto and Torwette rounds. It turns out that given the relatively high probability of a rollover, it is optimal to overbet favourite outcomes (as compared to the probability of their occurrence). Comparing optimal with actual gamblers' behaviour we find that overbetting is even more pronounced than predicted by the model. This means that gamblers bet too frequently on relatively probable results whereas less probable results are too infrequently chosen relatively to the optimal strategy.

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    File Function: First version, 2000
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    Paper provided by Institute for Advanced Studies in its series Economics Series with number 87.

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    Length: 33 pages
    Date of creation: Oct 2000
    Handle: RePEc:ihs:ihsesp:87
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    1. Simon, Jonathan, 1998. "An Analysis of the Distribution of Combinations Chosen by UK National Lottery Players," Journal of Risk and Uncertainty, Springer, vol. 17(3), pages 243-276, December.
    2. Ursula HAUSER & Ulrich KÖNIG, 1999. "Parimutuel Lotteries: Gamblers' Behavior and the Demand for Tickets," Vienna Economics Papers vie9905, University of Vienna, Department of Economics.
    3. Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-174, Spring.
    4. Hauser, U. & Konig, U,, 1999. "Parimutuel Lotteries: Gambler's Behavior and the Demand for Tickets," Papers 9905, Washington St. Louis - School of Business and Political Economy.
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