Stability of Choices among Uncertain Alternatives

McGlothlin, William H.

doi:10.2307/1419083

Cited by 230 publications

(42 citation statements)

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“…The misperceptions of probability have been suggested (Snowberg and Wolfers, 2010) to account for the favorite-longshot bias (Griffith, 1949). It has further been discussed (Thaler and Ziemba, 1988) that the favorite-longshot bias would tend to become more prominent for the last races of the day (McGlothlin, 1956) possibly due to loss aversion (Kahneman and Tversky, 1979): “ Bettors on average are losing toward the end of the day. They would like to go home a winner, but do not want to risk losing much more money (quoted from page 171 of Thaler and Ziemba, 1988),” although loss aversion was not evident in recent data (Snowberg and Wolfers, 2010).…”

Section: Discussionmentioning

confidence: 99%

Rank among Peers during Game Competition Affects the Tendency to Make Risky Choices in Adolescent Males

et al. 2017

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It has been shown that adolescents take more risks when they are with peers than when they are alone, presumably because the presence of peers can be a social reward/punishment that can bias decision making. Competition is inherent in peer interactions, and recent work has demonstrated that winning/losing is an intrinsic social reward/punishment. Taken together, it can be hypothesized that competition amongst peers affects adolescents’ risky behavior. While there is much evidence that status amongst peers can relate to antisocial/aggressive behavior, it remains unclear whether risky behavior is affected. Moreover, the degree to which ‘temporary status,’ such as ranking in a short-term competitive game, affects behavior is uncertain, an important issue because adolescents might be sensitive to situations or factors which potentially destabilize existing hierarchies. In this experiment, these issues were directly explored in the classroom environment using smartphone technology and Wi-Fi setup. Male junior high school students (aged 14–15) performed a roulette game task on smartphones, playing either independently or against five classmates. In the latter case, the students’ current ranks within the group of six were constantly presented on smartphone screens. To dissociate the effects of the students’ reactions to ranks from their actual performances, unknown to the students, the ranks presented were actually predetermined so that about half of the students were continuously presented with high ranks whereas the other half were continuously presented with low ranks. We found that the students presented with low ranks made more risky plays than those not presented with ranks or those presented with high ranks. This result suggests that even temporary status significantly affects adolescents’ risky behavior, and also demonstrates the usefulness of smartphones in examining and manipulating peer interactions in classroom experiments.

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Section: Discussionmentioning

confidence: 99%

Rank among Peers during Game Competition Affects the Tendency to Make Risky Choices in Adolescent Males

et al. 2017

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“…These offer strong evidence for a consistent over-or underestimation of the probability of long shots or favourites winning (the favourite-long shot bias). These conclusions have been reached for studies widely dispersed in time and across a variety of countries (e.g., McGlothlin 1956, Ali 1977, Tuckwell 1983, Ziemba and Hausch 1986, Bird and McRae 1994, Bruce and Johnson 2000. However, these studies do not generally detect opportunities for trading profitably on this information.…”

Section: Introductionmentioning

confidence: 93%

Exploring Decision Makers’ Use of Price Information in a Speculative Market

2006

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W e explore the extent to which the decisions of participants in a speculative market effectively account for information contained in prices and price movements. The horse race betting market is an ideal environment to explore these issues. A conditional logit model is constructed to determine winning probabilities based on bookmakers' closing prices and the time-indexed movement of prices to the market close. We incorporate a technique for extracting predictors from price (odds) curves using orthogonal polynomials. The results indicate that closing prices do not fully incorporate market price information, particularly information that is less readily discernable by market participants.

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“…This then suggests a different set of behavioural influences on decision process and outcome (see, e.g., Keren and Wagenaar, 1985;Rachlin, 1990). A number of contributions point to the relationship between declining capital and increasing risk preference (see, e.g., Gilovich and Douglas, 1986;Golec and Tamarkin, 1995;McGlothlin, 1956) which results in over-betting of longshots in the last race. It has also been argued that an increased propensity to bet on longshots in the last race increases the value and appeal of favourite betting among bettors who are aware of it (Johnson and Bruce, 1993).…”

Section: Last Race Effectmentioning

confidence: 99%

Power, Not Fear: A Collusion-Based Account of Betting Market Inefficiency

Bruce

Marginson

2013

International Journal of the Economics of Business

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We examine racetrack betting market inefficiency. We argue that the overround -an established measure of inefficiency -may be seen as a reflection of bookmakers' collusive returns maximising behaviour, rather than simply as their response to an adverse selection problem. We test, and find empirical support for, several proposed market effects of bookmaker (market maker) collusion. Besides number of race participants, overround varies significantly according to (1) whether or not the race is the last at the race meeting, (2) racetrack location, (3) day of the week (weekday vs. weekend), (4) type of race (handicap vs. non-handicap), and (5) type of race event (Flat/National Hunt). The study provides fresh insight into the origins of betting market inefficiency, where the link between market structure and context and bookmaker behaviour is a key feature. Regarding the broader implications, the study alerts us to the potential for financial market inefficiencies such as the bid-ask spread to be explained, in part, as a consequence of market makers' opportunistic behaviour wherever and whenever it is possible for intermediaries to exploit their understanding of investor behaviour.

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Stability of Choices among Uncertain Alternatives

Cited by 230 publications

References 0 publications

Rank among Peers during Game Competition Affects the Tendency to Make Risky Choices in Adolescent Males

Rank among Peers during Game Competition Affects the Tendency to Make Risky Choices in Adolescent Males

Exploring Decision Makers’ Use of Price Information in a Speculative Market

Power, Not Fear: A Collusion-Based Account of Betting Market Inefficiency

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