Journal of Economic Perspectives: Vol. 2 No. 2 (Spring 1988)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


JEP - All Issues

Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries

Article Citation

Thaler, Richard H., and William T. Ziemba. 1988. "Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries." Journal of Economic Perspectives, 2(2): 161-174.

DOI: 10.1257/jep.2.2.161


Economists have given great attention to stock markets in their efforts to test the concepts of market efficiency and rationality. Yet wagering markets are, in one key respect, better suited for testing market efficiency and rationality. The advantage of wagering markets is that each asset (bet) has a well-defined termination point at which its value becomes certain. The absence of this property is one of the factors that has made it so difficult to test for rationality in the stock market. Since a stock is infinitely lived, its value today depends both on the present value of future cash flows and on the price someone will pay for the security tomorrow. Indeed, one can argue that wagering markets have a better chance of being efficient because the conditions (quick, repeated feedback) are those which usually facilitate learning. However, empirical research has uncovered several interesting anomalies. While there are numerous types of wagering markets, legal and otherwise, this column will concentrate on racetrack betting and lotto-type lottery games.

Article Full-Text Access

Full-text Article (Complimentary)


Thaler, Richard H. (Unlisted)
Ziemba, William T. (Unlisted)

JEL Classifications

635: Industry Studies--Services--Entertainment, Recreation, Tourism
026: Theory of Uncertainty and Information


View Comments on This Article (0) | Login to post a comment

Journal of Economic Perspectives

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


JEP - All Issues

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us