Estimating preferences under risk: The case of racetrack betters

In this paper we investigate the attitudes toward risk of betters in Britis h horse races. The model we use allows us to go beyond the expected utility framework and to explore various alternative proposals by estimating a mul tinomial model on a 34,443-race data set. We find that rank-dependent utili ty models do not fit the data noticeably better than expected utility model s. On the other hand, cumulative prospect theory has higher explanatory pow er. Our preferred estimates suggest a pattern of local risk aversion simila r to that proposed by Friedman and Savage.