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What drives intermediation costs? A case of tennis betting market

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  • Štefan Lyócsa
  • Igor Fedorko

Abstract

We demonstrate that there is a considerable variation in bookmaker margins across matches, time and bookmakers. Our results imply that using match, tournament and players’ characteristics explains the variations in margins hence, they can be helpful in managing intermediation cost in a market of state-contingent assets: fixed-odds betting markets. We also provide evidence that bookmakers protect themselves by increasing odds on the favourite player, thus attracting more bettors to the favourite player, while deterring bettors from betting on the underdog by reducing the odds. By that process, bookmakers are possibly sacrificing a portion of their margin.

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  • Štefan Lyócsa & Igor Fedorko, 2016. "What drives intermediation costs? A case of tennis betting market," Applied Economics, Taylor & Francis Journals, vol. 48(22), pages 2037-2053, May.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:22:p:2037-2053
    DOI: 10.1080/00036846.2015.1111993
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    Cited by:

    1. Karl Whelan, 2024. "Risk aversion and favourite–longshot bias in a competitive fixed‐odds betting market," Economica, London School of Economics and Political Science, vol. 91(361), pages 188-209, January.
    2. Carlos Gomez-Gonzalez & Julio del Corral, 2018. "The betting market over time: overround and surebets in European football," Economics and Business Letters, Oviedo University Press, vol. 7(4), pages 129-136.

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