An Explanation of Optimal Each-Way Bets based on Non-Expected Utility Theory

David A. Peel and Davind Law

Journal of Gambling Business and Economics, 2009, vol. 3, issue 2, pages 15-35

Abstract: The purpose in this paper is to demonstrate how the non-expected utility models of Markowitz and Kahneman and Tversky can explain why an agent, chooses to bet each way on a horse. We also show that that appeal to moments of return, such as a preference for skewness of return, ceteris paribus, to explain the choice of the each way gamble over the single win gamble is, in general, invalid.

Keywords: MARKOWITZ UTILITY FUNCTION; CUMULATIVE PROSPECT THEORY; EXPO-VALUE UTILITY FUNCTION; PROBABILITY DISTORTION; GAMBLING (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2009
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