Examining NFL betting contracts at Tradesports.com, we find mispricing consistent with the disposition effect, where investors are more likely to close out profitable positions than losing positions. Prices are too low when teams are ahead and too high when teams are behind. Returns following...

We experimentally test a theory of risky choice in which the perception of a lottery payoff is noisy due to information processing constraints in the brain. We model perception using the principle of efficient coding, which implies that perception is most accurate for those payoffs that occur...