scholarly journals College Better: Parimutuel Betting Markets as a Commitment Device and Monetary Incentive

2017 ◽  
Author(s):  
Lester Lusher
Keyword(s):  
Monetary Incentive ◽  
Betting Markets ◽  
Parimutuel Betting ◽  
Commitment Device

Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries

1988 ◽  
Vol 2 (2) ◽  
pp. 161-174 ◽  
Author(s):  
Richard H Thaler ◽  
William T Ziemba
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Empirical Research ◽  
Stock Markets ◽  
Cash Flows ◽  
Present Value ◽  
Betting Markets ◽  
Future Cash Flows ◽  
Termination Point ◽  
Parimutuel Betting

Economists have given great attention to stock markets in their efforts to test the concepts of market efficiency and rationality. Yet wagering markets are, in one key respect, better suited for testing market efficiency and rationality. The advantage of wagering markets is that each asset (bet) has a well-defined termination point at which its value becomes certain. The absence of this property is one of the factors that has made it so difficult to test for rationality in the stock market. Since a stock is infinitely lived, its value today depends both on the present value of future cash flows and on the price someone will pay for the security tomorrow. Indeed, one can argue that wagering markets have a better chance of being efficient because the conditions (quick, repeated feedback) are those which usually facilitate learning. However, empirical research has uncovered several interesting anomalies. While there are numerous types of wagering markets, legal and otherwise, this column will concentrate on racetrack betting and lotto-type lottery games.

scholarly journals Parimutuel betting markets as information aggregation devices: experimental results

2003 ◽  
Vol 22 (2) ◽  
pp. 311-351 ◽  
Author(s):  
Charles R. Plott ◽  
Jorgen Wit ◽  
Winston C. Yang
Keyword(s):  
Information Aggregation ◽  
Experimental Results ◽  
Betting Markets ◽  
Parimutuel Betting

scholarly journals Surprised by the Parimutuel Odds?

2009 ◽  
Vol 99 (5) ◽  
pp. 2129-2134 ◽  
Author(s):  
Marco Ottaviani ◽  
Peter Norman Sørensen
Keyword(s):  
Private Information ◽  
Ex Post ◽  
Betting Markets ◽  
Parimutuel Betting ◽  
Empirical Analyses

Empirical analyses of parimutuel betting markets have documented that market probabilities of favorites (longshots) tend to underestimate (overestimate) the corresponding empirical probabilities. We argue that this favorite-longshot bias is consistent with bettors taking simultaneous positions on the basis of private information about the likelihood of different outcomes. The ex post realization of a high market probability indicates favorable information about the occurrence of an outcome—and the opposite is true for longshots. This explanation for the bias relies on the bettors' inability to incorporate the surprise revealed by the final odds. (JEL D81, D82, L83)

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