Bets and bids: favorite-longshot bias and winner's curse

Jan Potters and Jorgen Wit
Additional contact information
Jorgen Wit: University of Amsterdam

Microeconomics from University Library of Munich, Germany

Abstract: A well-documented anomaly in racetrack betting is that the expected return per dollar bet on a horse increases with the probability of the horse winning. This socalled "favorite- longshot bias" is at odds with the presumptions of market efficiency. We offer a new solution to this much-debated puzzle which is related to another famous anomaly. We show that the bias can be explained by the same behavioral assumption that underlies the well-known "winner's curse" in common value auctions.

Keywords: parimutuel market; favorite-longshot bias (search for similar items in EconPapers)
JEL-codes: D1 D2 D3 D4 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1997-06-16
New Economics Papers: this item is included in nep-mic
Note: Type of Document - WordPerfect; prepared on IBM PC; to print on HP Laserprinter 4; pages: 22 ; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/9706/9706003.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/9706/9706003.html (text/html)
https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/9706/9706003.ps.gz (application/postscript)

Related works:
Working Paper: Bets and Bids: Favorite-Longshot Bias and Winner's Curse (1996)
Working Paper: Bets and Bids: Favorite-Longshot Bias and Winner's Curse (1996)
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:wpa:wuwpmi:9706003

Access Statistics for this paper

More papers in Microeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).