Authors: Hurley, William; McDonough, Lawrence
Source: The Journal of Gambling Business and Economics, Volume 1, Number 1, February 2007 , pp. 3-12(10)
In the study of wagering markets, it is generally the case that the objective probabilities of various contestants (horses, teams, etc.) winning do not match those implied by the betting. More often than not favourites are underbet and longshots overbet, although some studies have found the reverse. We offer an explanation in the case where there is imperfect competition among book-makers and heterogeneous expectations among bettors.