Competition and Monopoly in the Market for Pari-Mutuel Bets — A Theoretical Approach

Herbert Walther
Additional contact information
Herbert Walther: Vienna University of Economics and Business Administration

Journal of Gambling Business and Economics, 2008, vol. 2, issue 2, 61-78

Abstract: An intertemporal state dependent expected utility model (generating S-shaped probability weighting by incorporating anticipated flows of utility from elation and disappointment) is used as a framework for analyzing the demand for various gambles. The analysis is extended to compare pari-mutuel bets under competitive and monopolistic conditions. The following conclusions can be drawn: (1) A monopoly fosters the `skeweness' of the pari-mutual bet: In equilibrium, the wager and the demand for probability to win are lower, while the wager per unit of probability to win and the prize are higher. (3) If prize expectations are endogenous, rollovers might be a necessary device to prevent instability. (4) Rational gamblers will be indifferent between `wager tax' and `bank holder' type methods of raising monopoly profits.

JEL-codes: D81 H71 L83 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.ubplj.org/index.php/jgbe/article/view/531 (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:2:y:2008:i:2:p:61-78

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 ().