Toward an understanding of the origins of the favourite-longshot bias: evidence from online poker markets, a real-money natural laboratory
Toward an understanding of the origins of the favourite-longshot bias: evidence from online poker markets, a real-money natural laboratory
Evidence of differential returns to bets placed with different probabilities of success has revealed a broadly systematic tendency for low/high probability events to be relatively over/under-bet, a phenomenon known as the favourite-longshot bias. While most of the literature focuses on sports, especially horse racing, we report here the existence of the same phenomenon in online poker games. We find that misperception rather than risk-love offers the best explanation for the behaviour we identify. The paper contributes to the more general literature explaining betting behaviour as well as the prevalence of the favourite-longshot bias in betting markets.
risk, information, efficiency, betting, decision-making
360-382
Vaughan Williams, Leighton
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Sung, Ming
2114f823-bc7f-4306-a775-67aee413aa03
Fraser-Mackenzie, Peter A.F.
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Peirson, John
913531d9-df66-4db5-bc4c-253977326bc9
Johnson, Johnnie E.V.
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April 2018
Vaughan Williams, Leighton
f5543d8e-ecd3-4fb0-a02f-f7220cf6c161
Sung, Ming
2114f823-bc7f-4306-a775-67aee413aa03
Fraser-Mackenzie, Peter A.F.
0582f787-6e98-45ec-aeb5-4e563f3f39c5
Peirson, John
913531d9-df66-4db5-bc4c-253977326bc9
Johnson, Johnnie E.V.
6d9f1a51-38a8-4011-a792-bfc82040fac4
Vaughan Williams, Leighton, Sung, Ming, Fraser-Mackenzie, Peter A.F., Peirson, John and Johnson, Johnnie E.V.
(2018)
Toward an understanding of the origins of the favourite-longshot bias: evidence from online poker markets, a real-money natural laboratory.
Economica, 85 (338), .
(doi:10.1111/ecca.12200).
Abstract
Evidence of differential returns to bets placed with different probabilities of success has revealed a broadly systematic tendency for low/high probability events to be relatively over/under-bet, a phenomenon known as the favourite-longshot bias. While most of the literature focuses on sports, especially horse racing, we report here the existence of the same phenomenon in online poker games. We find that misperception rather than risk-love offers the best explanation for the behaviour we identify. The paper contributes to the more general literature explaining betting behaviour as well as the prevalence of the favourite-longshot bias in betting markets.
Text
Economica_paper submitted 040116.docx
- Accepted Manuscript
More information
Accepted/In Press date: 8 February 2016
e-pub ahead of print date: 27 June 2016
Published date: April 2018
Keywords:
risk, information, efficiency, betting, decision-making
Organisations:
Centre of Excellence in Decision, Analytics & Risk Research
Identifiers
Local EPrints ID: 388209
URI: http://eprints.soton.ac.uk/id/eprint/388209
ISSN: 0013-0427
PURE UUID: 22c4205f-8058-4ddd-837f-938e6772d6fc
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Date deposited: 22 Feb 2016 11:16
Last modified: 15 Mar 2024 05:24
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Contributors
Author:
Leighton Vaughan Williams
Author:
Peter A.F. Fraser-Mackenzie
Author:
John Peirson
Author:
Johnnie E.V. Johnson
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