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Sequential Parimutuel Games

Robert Feeney () and Stephen King ()

No 736, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: In a parimutuel betting system, a successful player's return depends on the number of players who choose the same action. This paper examines a general solution for two-action sequential parimutuel games, and shows how the (unique) equilibrium of such games leads to a simple pattern of behaviour. In particular, we show that there is an advantage to being an early mover, that early players might choose actions with an ex ante low probability of success, and that player action choices can 'flip' with small changes in the parameters of the game.

Keywords: GAME THEORY; INVESTMENTS (search for similar items in EconPapers)
JEL-codes: C72 D84 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2000
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