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dc.contributor.authorSnowberg, Eriken
dc.contributor.authorWolfers, Justinen
dc.date.accessioned2010-05-03-
dc.date.accessioned2010-07-23T09:35:36Z-
dc.date.available2010-07-23T09:35:36Z-
dc.date.issued2010-
dc.identifier.urihttp://hdl.handle.net/10419/36914-
dc.description.abstractThe favorite-longshot bias describes the longstanding empirical regularity that betting odds provide biased estimates of the probability of a horse winning - longshots are overbet, while favorites are underbet. Neoclassical explanations of this phenomenon focus on rational gamblers who overbet longshots due to risk-love. The competing behavioral explanations emphasize the role of misperceptions of probabilities. We provide novel empirical tests that can discriminate between these competing theories by assessing whether the models that explain gamblers' choices in one part of their choice set (betting to win) can also rationalize decisions over a wider choice set, including compound bets in the exacta, quinella or trifecta pools. Using a new, large-scale dataset ideally suited to implement these tests we find evidence in favor of the view that misperceptions of probability drive the favorite-longshot bias, as suggested by Prospect Theory.en
dc.language.isoengen
dc.publisher|aInstitute for the Study of Labor (IZA) |cBonnen
dc.relation.ispartofseries|aIZA Discussion Papers |x4884en
dc.subject.jelD03en
dc.subject.jelD49en
dc.subject.jelG12en
dc.subject.jelL83en
dc.subject.ddc330en
dc.subject.keywordPricing under risken
dc.subject.keywordprobability weightingen
dc.subject.keywordcompound lotteriesen
dc.subject.keywordfavorite-longshot biasen
dc.subject.stwGlücksspielen
dc.subject.stwEntscheidung bei Unsicherheiten
dc.subject.stwBiasen
dc.subject.stwProspect Theoryen
dc.subject.stwWahrnehmungen
dc.subject.stwRisikopräferenzen
dc.subject.stwTesten
dc.titleExplaining the favorite-longshot bias: Is it risk-love or misperceptions?-
dc.type|aWorking Paperen
dc.identifier.ppn625137000en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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