An Explanation of Inefficiencies in the Pelota Betting Market: Rank Dependent Expected Utility

Loreto Llorente
Additional contact information
Loreto Llorente: Universidad Publica de Navarra, Campus Arrosadia

Journal of Gambling Business and Economics, 2007, vol. 1, issue 2, 147-163

Abstract: In Pelota matches, games with two mutually exclusive and exhaustive outcomes, bets on the winner are made through a middleman who receives 16% of the finally paid amount. The classical decision theory of expected utility maximization can not explain this market assuming bettors are identical. Llorente and Aizpurua (2007) explain the existence of bets in the market under Quiggin's rank dependent expected utility (RDEU) model. They find that bettors have to be optimistic in order to explain the existence of a bet. Analyzing the way odds are fixed in the market Llorente (2006) finds that assuming equal return on bets there are inefficiencies in the market. In this paper we show that, given an assumption that bettors are rank dependent expected utility maximizers, these inefficiencies tend to disappear.

Keywords: BETTING; PELOTA BETTING SYSTEM; SPORT BETTING; MARKET EFFICIENCY; RANK DEPENDENT EXPECTED UTILITY; INDIVIDUAL DECISION MAKING (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.ubplj.org/index.php/jgbe/article/view/515 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:buc:jgbeco:v:1:y:2007:i:2:p:147-163

Ordering information: This journal article can be ordered from
http://www.jgbe.com/index_files/Page492.htm

Access Statistics for this article

Journal of Gambling Business and Economics is currently edited by Leighton Vaughan Williams, Nottingham Business School

More articles in Journal of Gambling Business and Economics from University of Buckingham Press
Bibliographic data for series maintained by Dominic Cortis, University of Malta ().