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Journal of Political Economy Vol. 108 No. 3 2000

Estimating Preferences under Risk: The Case of Racetrack Bettors

Bruno Jullien1,2; Bernard Salanié2,3,4

1 Institut d'Économie Industrielle · 2 Centre National pour la Recherche Scientifique et Technique (CNRST) · 3 Centre de Recherche en Économie et Statistique · 4 Centre for Economic Policy Research

Abstract

In this paper we investigate the attitudes toward risk of bettors in British horse races. The model we use allows us to go beyond the expected utility framework and to explore various alternative proposals by estimating a multinomial model on a 34,443‐race data set. We find that rank‐dependent utility models do not fit the data noticeably better than expected utility models. On the other hand, cumulative prospect theory has higher explanatory power. Our preferred estimates suggest a pattern of local risk aversion similar to that proposed by Friedman and Savage.

DOI
10.1086/262127
Volume
108
Issue
3
Pages
503-530
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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