Numerous empirical studies pertaining to wagering on horse races have demonstrated that favorites are underbet and longshots are overbet, relative to their actual chances, therein demonstrating the “favorite-longshot bias.”

The bias becomes more pronounced as field sizes narrow, as bettors take on additional risk in search of higher returns.

The most definitive confirmation of the favorite-longshot bias came from a study published in 2010 by professors from Cal Tech and Wharton. They statistically analyzed the Equibase archives of every race run in the United States between 1992 and 2001, which yielded over 6.4 million starts.

The investigation included not only win bets but also exotics like exactas, quinellas, and trifectas. A common explanation for the favorite-longshot bias is that longshots are overbet owing to gamblers love of risk. An alternative explanation is that bettors misperceive actual probabilities and place wagers inconsistent with the true odds of winning. The 2010 study found much stronger support for the latter explanation.

More recently, researchers at UCLA and in Germany have examined the psychological bias of wagering referred to as “partition dependence.” People generally think that a numerical event is more likely to occur when it is partitioned or divided into smaller intervals. To illustrate, when bettors were given choices pertaining to how many NBA playoff games the Miami Heat would win, they wagered 20% more when the options were 4-to-7 games and 8-to-11 games, rather than the single interval 4-to-11 games.

Thus the amount people wager is influenced by how a bet is presented. Partition dependence shows why it is advantageous for racetracks to offer races with full fields. If two horses are coupled in a race, the coupled entry will typically generate less handle than would the two horses running as separate entries. Partition dependence shows yet another reason why racetracks benefit from larger fields.

Above all, bettors seek bigger returns, and races with full fields of entries, or intervals, offer a better opportunity for a higher return. Increasing the number of intervals should augment handle on a given race. To bettors, the sum of the parts–the intervals–are psychologically greater than the whole.

Copyright © 2013 the Blood-Horse. Used with permission.