Research Paper No. 736

SEQUENTIAL PARIMUTUEL GAMES

by

ROB FEENEY & STEPHEN P. KING
 
 

FEBRUARY 2000

Department of Economics. University of Melbourne. Melbourne Victoria 3010 Australia

  ABSTRACT

In a parimutuel betting system, a successful player's return depends on the number of players who choose the same action. This paper examines a general solution for two-action sequential parimutuel games, and shows how the (unique) equilibrium of such games leads to a simple pattern of behaviour. In particular, we show that there is an advantage to being an early mover, that early players might choose actions with an ex ante low probability of success, and that player action choices can 'flip' with small changes in the parameters of the game.

 

 

 

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