ISIPTA'07 - FIFTH INTERNATIONAL SYMPOSIUM ON
IMPRECISE PROBABILITY: THEORIES AND APPLICATIONS

Charles University, Faculty of Mathematicsand Physics
Prague, Czech Republic
16-19 July 2007

ELECTRONIC PROCEEDINGS

Caroline Lynch, Don Barry

Estimating Probability Distributions by Observing Betting Practices

Abstract

A bookmaker takes bets on a two-horse race, attempting to minimise expected loss over all possible outcomes of the race. Profits are controlled by manipulation of customers' betting behaviour; in order to do this, we need some information about the probability distribution which describes how the customers will bet. We examine what information initial customers' betting behaviour provides about this probability distribution, and consider how to use this to estimate the probability distribution for remaining customers.

Keywords. EM Algorithm, bookmaker, horse race, Markov decision process

Paper Download

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Authors addresses:

Caroline Lynch
Department of Mathematics
National University of Ireland, Galway

Don Barry
Vice-president,
University of Limerick

E-mail addresses:

Caroline Lynch caroline.lynch@nuigalway.ie
Don Barry vpa@ul.ie


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