Imperfect Market-Maker Competition, Heterogeneous Expectations, and The Favourite-Longshot Bias in Wagering Markets

William Hurley and Lawrence McDonough

Journal of Gambling Business and Economics, 2007, vol. 1, issue 1, 3-12

Abstract: In the study of wagering markets, it is generally the case that the objective probabilities of various contestants (horses, teams, etc.) winning do not match those implied by the betting. More often than not favourites are underbet and longshots overbet, although some studies have found the reverse. We offer an explanation in the case where there is imperfect competition among book-makers and heterogeneous expectations among bettors.

JEL-codes: L83 (search for similar items in EconPapers)
Date: 2007
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