Donald B. Hausch

Efficiency of Racetrack Betting Markets

A reprint of one of the classic volumes on racetrack efficiency, this book is the only one in its field that deals with the racetrack betting market in-depth, containing all the important historical papers on racetrack efficiency. As evidenced by the collection of articles, the understanding of racetrack betting is clearly drawn from, and has correspondingly returned something to, all the fields of psychology, economics, finance, statistics, mathematics and management science.

Arbitrage Strategies for Cross-Track Betting on Major Horse Races

Cross-track betting permits bettors to place their local tracks on a race being run at another track. Since each track operates a separate betting pool, the odds can vary across the tracks. The data suggest that the odds vary, and they often vary dramatically, allowing arbitrage opportunities. This article employs a risk-free arbitrage model to demonstrate the cross-track inefficiency and recommends an optimal capital growth model for exploiting it. A simple method is proposed for a single bettor at a single cross track. The results indicate that these methods would have worked well in practice on a number of recent Triple Crown races. Copyright 1990 by the University of Chicago.

Sequential Procurement With Subcontracting

Two symmetric sellers are approached sequentially by fragmented buyers. Each buyer conducts a second-price auction and purchases from the seller who offers the lower price. Winning an auction affects bidding for future contracts because the sellers have nonconstant marginal costs. We assume that the sellers are completely informed, and we study the unique equilibrium that survives iterated elimination of weakly dominated strategies. If subcontracting between the sellers is impossible, the final allocation of contracts is generally inefficient. If postauction subcontracting is possible, the sellers can be worse off, ex ante, than when subcontracting is impossible.

An Asymmetric Common-Value Auction Model

This article develops a model allowing asymmetric information between two bidders in an auction for a common-value object. It supposes that there is a common prior distribution on the objects value and that each bidder receives a private signal conditional on the objects unknown true value. Asymmetry comes about through a difference in the precision of the bidders signals. Placing a restriction on the nature of this difference, I determine the equilibrium bidding strategies for the first-price and second-price auctions. The strategies are symmetric, and the second-price auction generates a higher sellers expected revenue, a result that extends the well-known revenue-ordering result of symmetric-information auctions. I do, however, provide an example to show that this ordering is not necessarily maintained in a less restricted asymmetric setting. Finally, another example illustrates that the seller may prefer that bidders be asymmetrically informed to releasing information that would reduce the asymmetry.

A model of sequential auctions

Abstract Early results in sequential auctions show that the first auction bid is less than would be bid were there no later auctions. This appears to be an attempt to deceive the opponents for possible gains in later auctions. However, at equilibrium there is no deception. This paper generalizes and extends these earlier results.

An application of expert information to win betting on the Kentucky Derby, 1981–2005

Abstract The Kentucky Derby features top three-year-old thoroughbred horses. Run at miles, it is typically at least 1/8 mile longer than any of the horses has raced before. This extra distance, usually combined with a large field, makes the race a difficult test of stamina for horses this young. Bettors, because there is no direct evidence of whether a horse has the stamina to compete effectively at miles, are also challenged. The informational content of one publicly available, pedigree-based measure of stamina, the Dosage Index, is used with simple performance measures to identify a semi-strong-form inefficiency, and to create a betting scheme based on the optimal capital growth model that merges these criteria with the public’s opinion. Statistically significant profits, net of transaction costs, could have been achieved during the period 1981 to 2005.

Chapter 18 Efficiency of sports and lottery betting markets

Publisher Summary Sports and betting markets have received little attention relative to financial markets, they are well suited for testing market efficiency and bettor rationality. This chapter discussesresearch on horseracing, sports betting on football and basketball, and lotteries besides numerous studies of efficiency in these markets. Several profitable systems are also described. The continued success of these winning systems tends to be related to some complicating factor in its development or execution. For instance, the system may involve short odds and complex probability estimation, it may rely on syndicates of bettors, it could require extremely long time horizons, or extensive data collection and statistical work. The winning systems described are subset of the winning systems used in practice. The incentives to disclose details of a winning system may not be sufficient in some cases given that such an action typically reduces the systems profitability as others employ it. The optimal betting strategies for exploiting inefficiencies when present are described in the chapter.

Beat the Racetrack.

Beat the Racetrack. By William T. Ziemba and Donald B. Hausch. San Diego, Calif., Harcourt Brace Jovanovich, 1984. xx, 392p.,

Cooperative Investments and the Value of Contracting

22.95.