Marginal risk aversion and preferences in a betting market

An individual's behavioural attitudes toward variance and non-symmetry in the payoff distributions of pari-mutuel gambles are empirically examined using the von Neumann-Morgenstern expected utility of wealth paradigm. Preferences over payoff distributions for a representative better are estimated from observed payoffs at a greyhound racetrack. The results indicate that the representative better exhibits increasing absolute risk aversion and, given that the representative better is locally non-satiated with regard to wealth, exhibits preference for variance and aversion to positive skewness in the payoff distributions of the gambles examined.