Decision-making in betting markets

The placing of a bet is a classic example of decision-making under uncertainty. A betting market is also an example of a simple financial market, but one which possesses the advantage that each bet is characterised by a well-defined end point at which it possesses a definite value, i.e. the amount won or lost. Leighton Vaughan Williams explains the implications for our understanding of economic decision-making of the observed tendency for the expected returns on bets to differ markedly at different odds levels.