Risk Aversion and Favorite-Longshot Bias in a Competitive Fixed-Odds Betting Market

Karl Whelan ()

MPRA Paper from University Library of Munich, Germany

Abstract: Research on sports betting has generally found a favorite-longshot bias: Bets on longshots lose more than bets on favorites. Existing research focuses largely on pari-mutuel betting but favorite-longshot bias is also evident in fixed-odds online betting markets of the type that are growing rapidly around the world. Explanations for this bias in previous work on parimutuel markets cannot explain why it would be a feature of competitive fixed-odds betting markets. We show how disagreement among gamblers and risk-aversion on the part of bookmakers in a competitive market can produce a pattern of favorite-longshot bias resembling the empirical evidence.

Keywords: Sports Betting; Gambling; Favorite-Longshot Bias; Risk Aversion (search for similar items in EconPapers)
JEL-codes: D81 G14 L83 (search for similar items in EconPapers)
Date: 2023-02-09
New Economics Papers: this item is included in nep-spo and nep-upt
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https://mpra.ub.uni-muenchen.de/116923/1/MPRA_paper_116923.pdf original version (application/pdf)

Related works:
Journal Article: Risk aversion and favourite–longshot bias in a competitive fixed‐odds betting market (2024)
Working Paper: Risk Aversion and Favorite-Longshot Bias in a Competitive Fixed-Odds Betting Market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116923

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