Evidence of Adverse Selection from Thoroughbred Wagering

Previous research has shown the thoroughbred sales market to be affected by adverse selection. In the market, sellers who race as well as breed thoroughbreds will choose to keep thoroughbreds when their estimated private values exceed expected sales prices. The presence of asymmetric information lea...

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Bibliographic Details
Published in:Southern economic journal 2000-01, Vol.66 (3), p.700-714
Main Authors: Chezum, Brian, Wimmer, Bradley S.
Format: Article
Language:English
Subjects:
Adverse selection
Analysis
Asymmetric information
Betting
Breeding
Bullets
Economic models
Gambling
Horse breeding
Horse race betting
Horse racing
Horses
Hypotheses
Imperfect information
Information economics
Market prices
Prices
Product quality
Racing
Regression analysis
Sales
Studies
Training devices
Yearlings
Citations: Items that this one cites
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Summary:Previous research has shown the thoroughbred sales market to be affected by adverse selection. In the market, sellers who race as well as breed thoroughbreds will choose to keep thoroughbreds when their estimated private values exceed expected sales prices. The presence of asymmetric information leads these sellers to sell their low-quality horses and keep their best for racing. We extend the analysis by examining how bettors use similar information when wagering on thoroughbred races. We show, using a sample of two-year-old maiden races, that homebreds (those horses kept by their breeders for racing) are favored over otherwise similar nonhomebreds.
ISSN:0038-4038
2325-8012
DOI:10.1002/j.2325-8012.2000.tb00282.x