Choosing the Right Gambling Partner: Experimental Evidence (original) (raw)
Related papers
Choosing a gambling partner: testing a model of mutual insurance in the lab
Theory and Decision, 2011
In this paper we investigate how economic agents choose gambling partners and how paired risky choices di¤er from individual ones. To this aim we develop a simple model and design a laboratory experiment that allows us to compare individual versus paired decisions across two treatments where pairs are respectively exogenously and endogenously formed. In both treatments paired subjects decide individually and indipendently how to allocate their wealth over a portfolio of lotteries and fully commit to share any winnings. The main result from our experiment is that whenever agents are allowed to choose a gambling partner they decide to team up with other agents who display the same degree of risk aversion as themselves. Moreover paired choices consistentlty involve higher risk taking than individual choices. This …nding is more evident when information on subjects'risk attitudes is made available and when subjects team up in homogeneous pairs, thereby con…rming that subjects successfully exploit the bene…ts of mutual insurance. 5 Becker's (1993) marriage model shows how partners of similar quality are matched together; Kremer's (1993) O-Ring production function results in workers of the same skill being matched together; in the context of micro…nance, shows that borrowers of the same probability of success match together in group lending; Sadoulet (2000) predicts some heterogeneous matching when individuals are risk averse; and investigate whether individuals match assortatively along risk preferences in the context of insurance games …nding no evidence of it.
Economica, 2009
One feature of experimental work is the heterogeneity in risk attitudes and probability distortion displayed by agents. We outline a more general non-expected utility model, which nests the models of Markowitz, and Kahneman and Tversky. The model can generate the standard favourite-longshot bias or a reverse favourite-longshot bias as a result of optimal behaviour. We also provide new empirical evidence on the relationship between Tote and bookmaker returns and confirm that the relationship is not as originally conjectured by Gabriel and Marsden. We outline how our new model can provide an explanation of the relationship that is observed.
Betting, Selection, and Luck: A Long-Run Analysis of Repeated Betting Markets
Entropy, 2019
We consider a repeated betting market populated by two agents who wage on a binary event according to generic betting strategies. We derive new simple criteria, based on the difference of relative entropies, to establish the relative wealth of the two agents in the long-run. Little information about agents’ behavior is needed to apply the criteria: it is sufficient to know the odds traders believe fair and how much they would bet when the odds are equal to the ones the other agent believes fair. Using our criteria, we show that for a large class of betting strategies, it is generically possible that the ultimate winner is only decided by luck. As an example, we apply our conditions to the case of Constant Relative Risk Averse (CRRA) and quantal response betting.
A Theory of the Gambling E¤ ect
This paper presents a model for the "gambling e¤ect," i.e., the e¤ect that risky gambles are evaluated di¤erently than riskless outcomes due to an intrinsic utility (or disutility) of gambling. The model turns out to violate stochastic dominance and therefore its primary applications will be descriptive. It sheds new light on empirical observations of risk attitudes and provides new insights into the distinction between risky and riskless utility.
A Theory Of The Gambling Effect
SSRN Electronic Journal, 2000
This paper presents a model for the \gambling e®ect," i.e., the e®ect that risky gambles are evaluated di®erently than riskless outcomes due to an intrinsic utility (or disutility) of gambling. The model turns out to violate stochastic dominance and therefore its primary applications will be descriptive. It sheds new light on empirical observations of risk attitudes and provides new insights into the distinction between risky and riskless utility.
Gamblers' Behaviour: A Field Investigation
2020
The thesis presents a lab-in-the-field experiment collecting data on gamblers’ behaviour. The study provides an estimate of the incidence of Problematic Gambling (PG) among the usual customers of a large betting agency in Milan. We elicit in an incentivized manner a large battery of behavioural traits in order to investigate which of them are mostly characterizing PG. Moreover, we investigate a causal relationship between gambling activity and behavioural traits. We also keep detailed track of the gambling activity during the day of the interview to see which are the more interest patterns of the gambling activity. The results underline important differences between real and experimental observation. When we use experimental task to investigate a possible variation in risk preferences due to gambling activity we do not observe any significant impact on risk preferences. When we inspect risk preferences using data coming from the real gambling activity we find evidence of the diminis...
Utility of gambling II: risk, paradoxes, and data
Economic Theory, 2008
We specialize our results on entropy-modified representations of eventbased gambles to representations of probability-based gambles by assuming an implicit event structure underlying the probabilities, and adding assumptions linking the qualitative properties of the former and the latter. Under segregation and under duplex decomposition, we obtain numerical representations consisting of a linear weighted utility term plus a term corresponding to information-theoretical entropies. These representations accommodate the Allais paradox and most of the data due to Birnbaum and associates. A representation of mixed event-and probability-based gambles accommodates the Ellsberg paradox. We suggest possible extensions to handle the data not accommodated.
Sequential Betting Behavior: A Test of Asymmetric Inconsistencies in Group Decision Making
Psychology and Marketing
Previous research has shown that individual decision makers tend to bet more than initially planned after experiencing a loss but not after a gain. This research tests whether groups in consensus decision‐making contexts also demonstrate similar asymmetric inconsistencies. Two experiments, one at the individual level and one with three‐person groups, were carried out based on a gambling‐type betting task. Although individuals planned more conservatively than groups regarding their betting behavior after the first outcome, both individuals and groups misestimated their own betting behavior after losses but not after gains. Negative, but not positive, emotional reactions to previous decision outcomes were also misestimated, leading to incorrect predictions of future behavior. Implications for theory and future research are discussed.