I am reading "Influence" by Robert Cialdini. One source of influence is "social proof". Think of commercials that state, Tide is the best-selling detergent. The commercial is not stating directly that the product is any good. The fixed-action-pattern is that is everyone else is thinking a certain way then that thinking must be accurate. Cialdini describes many ways this fixed-action-pattern can be exploited, and one is at the racetrack.
Horse racing tracks are examples of pari-mutuel betting. The odds paid on any one horse are based on the betting. If many bettors bet on horse A and few bet on horse B then horse A winning will pay less per dollar bet horse B winning. For example, horse A may pay 4-to-1 odds while horse B pays 25-to-1. The racetrack calculates the odds to ensure that, whichever horse wins, it will have collected enough from the losing bettors to pay the winning bettors, with some left over as profit (or, more accurately, revenue).
Many bettors know little about horses and are content to bet on the horse with the smallest odds, figuring that the smaller odds represent a lot of bettors thinking that horse is likely to win.
A sharp bettor can take advantage of this fact by, at the start of betting, wagering heavily on an unlikely winner. This betting will drive the odds down; amateur bettors will take these odds as evidence of a likely win, bet on this horse, and drive the odds down further.
Then, this sharp bettor can bet on the horse he/she feels is most likely to win and receive better odds than if that original, distracting bet had never been placed. This strategy, if employed repeatedly, should generate higher-than-average payoffs.
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