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Market ecology and decision behaviour in state-contingent claims markets

Market ecology and decision behaviour in state-contingent claims markets
Market ecology and decision behaviour in state-contingent claims markets
This paper explores the influence of market ecology on the tendency for subjective probabilities to underestimate (overestimate) the objective probability of high (low) probability outcomes within a market for state contingent claims (UK horserace betting market). Features of market ecology, including processes, protocols, informational and incentive characteristics and the form of buyer–supplier relationships are identified as potentially influential on the incidence of this distortion. Conditional logit models are employed to demonstrate differential incidence of the distortion across different market forms and types, concluding that market ecology may play a significant role in the incidence of anomalies in markets.
markets, ecology, behaviour, distortions
0167-2681
199-217
Bruce, Alistair C.
acee9acc-fd28-44bf-8781-7a9d135319ac
Johnson, Johnnie E.V.
6d9f1a51-38a8-4011-a792-bfc82040fac4
Bruce, Alistair C.
acee9acc-fd28-44bf-8781-7a9d135319ac
Johnson, Johnnie E.V.
6d9f1a51-38a8-4011-a792-bfc82040fac4

Bruce, Alistair C. and Johnson, Johnnie E.V. (2005) Market ecology and decision behaviour in state-contingent claims markets. Journal of Economic Behavior & Organization, 56 (2), 199-217. (doi:10.1016/j.jebo.2003.09.009).

Record type: Article

Abstract

This paper explores the influence of market ecology on the tendency for subjective probabilities to underestimate (overestimate) the objective probability of high (low) probability outcomes within a market for state contingent claims (UK horserace betting market). Features of market ecology, including processes, protocols, informational and incentive characteristics and the form of buyer–supplier relationships are identified as potentially influential on the incidence of this distortion. Conditional logit models are employed to demonstrate differential incidence of the distortion across different market forms and types, concluding that market ecology may play a significant role in the incidence of anomalies in markets.

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More information

Published date: 2005
Keywords: markets, ecology, behaviour, distortions

Identifiers

Local EPrints ID: 35772
URI: https://eprints.soton.ac.uk/id/eprint/35772
ISSN: 0167-2681
PURE UUID: b17a2997-db0c-4f45-b1b3-fb40a0995487

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Date deposited: 22 May 2006
Last modified: 17 Jul 2017 15:46

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