Equilibrium Play in Experimental Parimutuel betting Markets
Abstract
Parimutuel wagering markets have attractive features, both as test beds for financial market theory, and as mechanisms for aggregating information. We design a laboratory experiment to test theoretical predictions of behavior in parimutuel betting markets. Our results are largely consistent with Bayesian Nash equilibrium play and shed light on the question of origin of the well-known favorite-longshot bias. Our results suggest that mechanisms which lead to heterogeneous private beliefs are behind the favorite-longshot bias, rather than the presence of probability distortions or risk-loving preferences.
About the presenter's visit
Joshua Miller will be visiting the School of Economics on Tuesday 29th November 2019. While here he will be using room 520A Colin Clark Building. If you would like to meet with him or have lunch or dinner with him please contact Dr Carlos Oyarzun who will be his host while at The University of Queensland. Dr Oyarzun can be contacted on c.oyarzun@uq.edu.au.
About Economic Theory Seminar Series
A seminar series designed specifically for economic theory researchers to network and collaborate.
Venue
The University of Queensland
St Lucia campus