Price setting and competition in fixed odds betting markets

In this chapter the authors show how bookmaker commissions, termed ‘over-round’, have fallen over time through greater competition, hence offering improved value for bettors. They take the English Premier League as their test case and focus on the two largest UK bookmakers. The findings are most interesting. First, over-rounds have fallen over time. Second, this reduction is attributable to the emergence of a betting exchange, Betfair, which has become increasingly popular in the UK. Third, perhaps surprisingly, the reduced commissions are not related to the growth of online bookmakers in the UK. Thus, it is increased competition from the betting exchange and not from online bookmakers that has exerted downward pressure on bookmaker over-rounds.