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Probability and Utility Estimates for Racetrack Bettors

In: Efficiency Of Racetrack Betting Markets

Author

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  • Mukhtar M. Ali

    (University of Kentucky, USA)

Abstract

Subjective and estimated objective winning probabilities are obtained from 20,247 harness horse races. It is shown that subjectively a horse with a low winning probability is exaggerated and one with a high probability of winning is depressed. Various hypotheses characterizing the bettors' behavior to explain the observed subjective-objective probability relation are explored. Under some simplified assumptions, a utility of wealth function of a decision maker is derived, and a quantitative summary measure of his risk attitude is defined. Attitude toward risk of a representative bettor is examined. It is found that he is a risk lover and tends to take more risk as his capital dwindles.

Suggested Citation

  • Mukhtar M. Ali, 2008. "Probability and Utility Estimates for Racetrack Bettors," World Scientific Book Chapters, in: Donald B Hausch & Victor SY Lo & William T Ziemba (ed.), Efficiency Of Racetrack Betting Markets, chapter 11, pages 71-83, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812819192_0011
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    Cited by:

    1. Yu, Dian & Gao, Jianjun & Wang, Tongyao, 2022. "Betting market equilibrium with heterogeneous beliefs: A prospect theory-based model," European Journal of Operational Research, Elsevier, vol. 298(1), pages 137-151.

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