NDLI: Loss aversion and mental accounting: the favorite-longshot bias in parimutuel betting

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Loss aversion and mental accounting: the favorite-longshot bias in parimutuel betting

Content Provider	Scilit
Author	Qiu, Jianying
Copyright Year	2012
Description	It is shown that in the framework of prospect theory, the combination of mental accounting and loss aversion can fundamentally change the way individuals evaluate risky alternatives. This finding is then applied in a market setting: parimutuel betting markets. In parimutuel betting markets it has been found that for horses with the lowest odds (favorites), market estimates of winning probabilities are smaller than objective winning probabilities; for horses with the highest odds (longshot) the opposite is observed (the favorite-longshot bias). A game theoretical model is built to show that the favorite-longshot bias can be the equilibrium play of players with loss aversion. Furthermore, the degree of the favorite-longshot bias is influenced by the mental accounting process that players use.
Related Links	https://www.econstor.eu/bitstream/10419/25591/1/546300049.PDF
Ending Page	184
Page Count	16
Starting Page	169
ISSN	00779954
e-ISSN	19434863
DOI	10.1080/00779954.2011.615116
Journal	New Zealand Economic Papers
Issue Number	2
Volume Number	46
Language	English
Publisher	Informa UK Limited
Publisher Date	2012-08-01
Access Restriction	Open
Subject Keyword	Agricultural Economics Loss Aversion Mental Accounting Parimutuel Betting the Favorite-longshot Bias
Content Type	Text
Resource Type	Article
Subject	Economics, Econometrics and Finance

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