Abstract
This paper tests the Asch-Quandt Betting Hypothesis, which accounts for the ubiquitous underbetting-overbetting (favourite-longshot) phenomenon found at most racetracks, by postulating that horserace wagering is a consumption activity. An experimental racetrack was designed with only off-track betting permissible, thereby eliminating much or all of the ‘consumption’ involved, but the basic anomaly remained, and in a somewhat stronger form. It is hypothesized that the observed betting behaviour of our subjects is consistent with prospect theory and its two-outcome equivalent, rank-dependent expected utility theory.
Published Version
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