The Optimality and Statistical Detection of Price Rigging in Betting Markets

The purpose of this paper is to determine empirically whether or not there is systematic price rigging in three Australian betting markets: Horse, harness and greyhound racing.  We present a simple model which shows the conditions under which it is optimal for insiders to rig prices by deliberate under-performance in some races.  We then show how an empirical analysis of the relationship between win and place probabilities in conjunction with observed patterns of betting behavior, may be used to establish the presence of price rigging.  It is shown that there is no significant systematic price rigging in these markets

THE PRODUCTION AND PREDICTION OF TRAFFIC ACCIDENTS

Traffic accidents are a painful and costly affliction all over the world. The discussion and debate over the most effective measures to adopt to enhance road safety is often based on folk theories and is not free of private interests and pressures. Road traffic is a complicated system of interactions providing transportation services.  Unfortunately, in conjunction with these services, traffic accidents, an awful public bad, are produced. The purpose of this paper is to study the production relationship, for inter-city transportation, between the physical factors, i.e., highways and vehicles, and traffic accidents. The upshot is prediction ability of accidents in any given road segment, existing or planned. The regretful aspect of roads runs counter to conventional wisdom which, failing to appreciate the quantitative relationship between roads and accidents, often advocates building more and wider roads as the remedy.  The empirically substantiated public bad property of roads, by way of production functions for traffic accidents, is useful for public policy, concerning the investment in highways versus other forms of transportation, such as rail.  They also promote better understanding of traffic accidents and their data and the methodology allows testing hypotheses relating to safety policy. This study sheds light on the enigma of the long-term decline in the probability of death on the road, as observed in many countries, by attributing it to the rising traffic density. The estimation also sheds light on the accident-externality imposed by road users on others. The results suggest that for inter-city roads the risk of fatal and severe accidents is over-internalized by road users as the marginal effect of traffic flow is smaller than the average

Inside Information in a Betting Market.

Inside information concerning a risky asset is presumed to be beneficial to its holder. Measurement of the impact and benefit of inside information is difficult because its use for financial gain is often illegal. Ideally one would like to investigate and compare two mutually isolated groups, one with and the other without access to inside information. The Australian horse-betting market offers such an opportunity. It is found that even exposure to 'second hand' inside information effects a change in behavior, a rise in payoffs, and adds power and significance to the prediction of race results. Copyright 1995 by Royal Economic Society.

On the timing of inside trades in a betting market

The paper presents a game-theoretical model to examine the equilibrium timing of insider trades in a market with a finite life span. An example of such a market is that for horse betting, where insiders must bet before the race or their information is of no value. We show that there is no equilibrium in pure strategies but that there is a unique, sub game perfect equilibrium in mixed strategies. The issue arises because waiting to bet may lead to information leaks whereas betting too soon may imply paying too high a price for the bet. We derive empirical hypotheses and test them.