Introduction

There is an extensive literature on the well-known longshot-favourite bias in the odds offered by bookmakers on horse-races, see Figgis (1951), Dowie (1976), Royal Commission on Gambling (1978), Tuckwell (1983), Crafts (1985), Henery (1985), Bird and McCrae (1987), Shin (1991, 1992, 1993), Jullien and Salanié (1994), Vaughan Williams and Paton (1997, 1998) and the authoritative survey by Vaughan Williams (1999). The motivation of this short chapter is to consider the empirical evidence and theory behind the proposition that the odds offered on a horse by bookmakers will depend on the other horses in the race. Past empirical evidence and theory appears not to have considered that the odds offered on a horse may depend on the other horses in the race.

Intuitively, one might expect that the most likely horse to affect the odds offered on other horses is the favourite. The odds on favourites vary from as little as 25 to 1 on to as much as 14 to 1 against. The bias in very short odds is minimal but for less strong favourites the bias is greater. It is suggested that strength of favourite may affect the degree of bias in the odds offered on other horses. On the basis of British flat horse-race statistics for 1993, it is shown that the degree of bias in odds offered on horses is positively related to the presence of strong favourites. Two possible explanations are proposed for this relation.