Constant bet size? Don't bet on it! Testing expected utility theory on betfair data

Abstrakt

I analyze the risk preferences of bettors using data from the world's largest betting exchange, Betfair. The assumption of a constant bet size, commonly used in the current literature, leads to an unrealistic model of bettors' decision making as a choice between a high return - low variance and low return - high variance bet, automatically implying risk-loving preferences of bettors.

Klíčová slova

• decision making under risk
• expected utility theory
• betting exchanges