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| Author: | Levitt, S.D. |
| Title: | Why are gambling markets organised so differently from financial markets? |
| Journal: | Economic Journal
2004 : APR, VOL. 114:495, p. 223-246 |
| Index terms: | Gambling industry Sports industry Football Markets Financial markets USA |
| Language: | eng |
| Abstract: | The market for sports gambling is structured very differently from the typical financial market. In sports betting, bookmakers (herefater as: b-m.) announce a price, after which adjustments are small and infrequent. B-m. do not play the traditional role of market makers matching buyers and sellers but, rather, take large positions with respect to the outcome of game. Using a unique data set, this study demonstrates that this peculiar price-setting mechanism allows b-m. to achieve substantially higher profits. B-m. are more skilled at predicting the outcomes of games than bettors and systematically exploit bettor biases by choosing prices that deviate from the market clearing price. |
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