Risk aversion and favourite–longshot bias in a competitive fixed‐odds betting market

Bibliographic Data

ID9727776
AuthorsKarl Whelan (0000-0002-4831-5269, University College Dublin, corresponding author)
Year2024
Volume91
Issue361
Pages188-209
Publication date2024-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecca.12500
OpenAlexW4387816108
LanguageEN
References cited26

Research on sports betting has generally found a favourite–longshot bias: bets on longshots lose more than bets on favourites. Existing research focuses largely on pari‐mutuel betting, but favourite–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 pari‐mutuel 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 favourite–longshot bias resembling the empirical evidence

Econometrics · Economics · Expected utility hypothesis · Favourite · Financial economics · Odds · Political science · Risk aversion (psychology) · Statistics · Decision-Making and Behavioral Economics · Gambling Behavior and Treatments · Mathematics · Sports Analytics and Performance