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dc.contributor.authorGeertsema, Paul
dc.contributor.authorSchumacher, Christoph Rainer
dc.date.accessioned2024-06-09T13:57:18Z
dc.date.available2024-06-09T13:57:18Z
dc.date.issued2016en_US
dc.identifier.issn0003-6846
dc.identifier.doi10.1080/00036846.2015.1093088
dc.identifier.urihttp://hdl.handle.net/20.500.12127/7489
dc.description.abstractExisting models in the parimutuel betting literature typically explain betting data by either assuming a single, representative bettor with certain risk preferences or by assuming that a number of risk neutral bettors compete strategically within a game theoretic framework. We construct a theoretical framework of parimutuel markets in which we model both strategic interaction and individual bettor risk preferences, distinguishing between sophisticated insiders and recreational outsiders. We solve this model analytically for the optimal insider betting amount in a static symmetric Nash equilibrium. A new data set of 126 million individual horse race bets in New Zealand from 2006 to 2014 allows us to calibrate the model. We find that insiders (those betting $100 or more) outperform outsiders by 7.5% in terms of realized returns. The best fit of the model to the data is obtained when insiders are assumed to be risk neutral and to have an information advantage of 0.08 in probability terms. This finding provides empirical support for the common assumption of risk neutrality in strategic interaction models of parimutuel betting.en_US
dc.language.isoenen_US
dc.publisherRoutledge, Taylor & Francisen_US
dc.subjectParimutuelen_US
dc.subjectBettingen_US
dc.subjectRisk Aversionen_US
dc.subjectGame Theoryen_US
dc.titleParimutuel contests with strategic risk-sensitive bettorsen_US
dc.identifier.journalApplied Economicsen_US
dc.source.volume48en_US
dc.source.issue12en_US
dc.source.beginpage1140en_US
dc.source.endpage1158en_US
dc.contributor.departmentDepartment of Accounting and Finance, The University of Auckland, Auckland, New Zealanden_US
dc.contributor.departmentSchool of Economics and Finance, Massey University, Auckland, New Zealanden_US
dc.identifier.eissn1466-4283
vlerick.knowledgedomainAccounting & Financeen_US
vlerick.typearticleJournal article with impact factoren_US
vlerick.vlerickdepartmentAFen_US
dc.identifier.vperid317171en_US


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