Gamblers' Rationality in Parimutuel Soccer Betting

Ursula Hauser, Ulrich Koenig and Elizaveta Krylova
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Ursula Hauser: Institute for Advanced Studies, Vienna
Ulrich Koenig: Department of Economics, University of Vienna
Elizaveta Krylova: Institute for Advanced Studies, Vienna

No 87, Economics Series from Institute for Advanced Studies

Abstract: A model for strategic behaviour in parimutuel gambles with unequal winning-probabilities is developed and applied to gambles based on soccer results. Assuming that the bookmakers' quotas reflect the true probability of each possible result of a soccer game, we are able to derive a formula for the expected payoff of a betting strategy (Tipp). Using recent (1996-99) data from the Austrian games Toto and Torwette we are able to calculate the optimal strategies for 90 Toto and Torwette rounds. It turns out that given the relatively high probability of a rollover, it is optimal to overbet favourite outcomes (as compared to the probability of their occurrence). Comparing optimal with actual gamblers' behaviour we find that overbetting is even more pronounced than predicted by the model. This means that gamblers bet too frequently on relatively probable results whereas less probable results are too infrequently chosen relatively to the optimal strategy.

Keywords: Decision making under risk and uncertainty; Parimutuel betting; Sports; Gambling (search for similar items in EconPapers)
JEL-codes: D12 L83 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2000-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://irihs.ihs.ac.at/id/eprint/1293 First version, 2000 (application/pdf)

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