Late Informed Betting and the Favorite-Longshot Bias

Marco Ottaviani and Peter Sørensen

No 03-33, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: According to the favorite-longshot bias observed in parimutuel betting, the final distribution of bets overestimates the winning chance of longshots. This paper proposes an explanation of this bias based on late betting by small privately informed bettors. These bettors have an incentive to protect their private information and bet at the last minute, without knowing the bets simultaneously placed by the others. Once the distribution of bets is revealed, if bets are more informative than noisy, all bettors can recognize that the longshot is less likely to win than indicated by the distrubution of bets.

Keywords: parimutuel betting; insider information; endogenous sequencing (search for similar items in EconPapers)
JEL-codes: C72 D82 G14 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2003-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/2003/0333.pdf/ (application/pdf)

Related works:
Working Paper: Late Informed Betting and the Favourite-Longshot Bias (2003)
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:kud:kuiedp:0333

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().