Towards an understanding of the origins of the favourite-longshot bias: evidence from online poker markets, a real-money natural laboratory

Vaughan Williams, L. ORCID: 0000-0002-9639-9217, Sung, M.-C., Fraser-Mackenzie, P.A.F., Peirson, J. and Johnson, J.E.V. ORCID: 0000-0003-3594-4696, 2016. Towards an understanding of the origins of the favourite-longshot bias: evidence from online poker markets, a real-money natural laboratory. Economica. ISSN 0013-0427

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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.

Item Type:	Journal article
Publication Title:	Economica
Creators:	Vaughan Williams, L., Sung, M.-C., Fraser-Mackenzie, P.A.F., Peirson, J. and Johnson, J.E.V.
Publisher:	Wiley-Blackwell
Date:	27 June 2016
ISSN:	0013-0427
Identifiers:	Number Type 10.1111/ecca.12200 DOI
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	15 Dec 2016 09:34
Last Modified:	28 Apr 2020 15:21
URI:	https://irep.ntu.ac.uk/id/eprint/29387

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