Favourite-longshot bias

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In gambling and economics, the favourite-longshot bias is an observed phenomenon where on average, bettors tend to overvalue "long shots" and undervalue favourites. That is, in a horse race where one horse is given odds of 2 to 1, and another 100 to 1, the true odds might typically be 1.5 to 1 and 300 to 1 respectively. Betting on the "long shot" is therefore a much worse proposition than betting on the favourite. Various theories exist to explain why people willingly bet on such losing propositions, such as risk-taking behaviour, or simply inaccurate estimation as presented by Sobel and Raines ^[1].

[edit] See also

Rank-dependent expected utility

[edit] Notes

^ Russell S. Sobel & S. Travis Raines, 2003. "An examination of the empirical derivatives of the favourite-longshot bias in racetrack betting," Applied Economics, Taylor and Francis Journals, vol. 35(4), pages 371-385, January