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On the Implications of the Markowitz Model of Utility embodying Gain Seeking Preferences for Odds on Betting and Bookmakers choice of Spread or Odds Betting

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  • David Alan Peel

    (University of Lancaster Dept.Economics)

Abstract

We demonstrate in a parametric formulation of the Markowitz model of utility that unless agents are initially gain seeking they will not bet on heavily odds on favorites for a given negative expected rate of return. The model supports Sauer's (1998) observation that it may not be profitable to make a market in contests involving heavy odds on favorites with implications for bookmakers choice of spread or odds markets in sports betting.

Suggested Citation

  • David Alan Peel, 2013. "On the Implications of the Markowitz Model of Utility embodying Gain Seeking Preferences for Odds on Betting and Bookmakers choice of Spread or Odds Betting," Economics Bulletin, AccessEcon, vol. 33(2), pages 1420-1428.
    • Handle: RePEc:ebl:ecbull:eb-13-00302
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    References listed on IDEAS

    as
    1. Linda M. Woodland & Bill M. Woodland, 2011. "The Reverse Favorite-Longshot Bias in the National Hockey League: Do Bettors Still Score on Longshots?," Journal of Sports Economics, , vol. 12(1), pages 106-117, February.
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    5. Atanu Saha, 1993. "Expo-Power Utility: A ‘Flexible’ Form for Absolute and Relative Risk Aversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 905-913.
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    More about this item

    Keywords

    Markowitz model of utility; Gain seeking preferences; limits to odds on betting; bookmaker choice of spreads versus odds markets; lopsided contests;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D0 - Microeconomics - - General

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