ON UTILITY FUNCTION ESTIMATION OF RACETRACK BETTORS

Racetrack betting makes possible the empirical study of people's behavior in decision making under uncertainty and risk in laboratory-like but still natural conditions. Hence, it gives an opportunity to empirically test the classical assumptions of rational behavior. In this paper it is found that empirical data from a Finnish racetrack do not support risk-aversion or risk-neutrality of bettors. This gives rise to the question of under exactly which cultural and other circumstances various assumptions regarding attitudes toward risk actually apply.