Â Sentimental Preferences and the Organizational Regime of Betting Markets
AbstractÂ We analyze the price impact of sentimental bettor preferences within a bookmaker betting market. Our model demonstrates that, under reasonable assumptions about the nature of demand in a market with strong competition, the bookmaker will offer lower prices for bets with comparatively stronger demand. Using a sample of more than 16,000 English soccer matches we find evidence that more favorable odds are extended to bets on more popular clubs and that this effect is amplified on weekends when sentimental bettors face lower opportunity costs to wager. Our findings help to explain why the market for sports gambling operates as a hybrid structure with bookmakers able to attract a considerable share of the betting volume although identical contracts are traded on exchange markets at lower costs; the organizational design of a quote-driven market enables the dealer to take advantage of sentimental bettor preferences.
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Bibliographic InfoPaper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0089.
Date of creation:
Date of revision: 2010
betting; market structure; sentiment; price elasticity;
Other versions of this item:
- Egon Franck & Erwin Verbeek & Stephan Nüesch, 2011. "Sentimental Preferences and the Organizational Regime of Betting Markets," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 502-518, October.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-14 (All new papers)
- NEP-CBE-2008-08-14 (Cognitive & Behavioural Economics)
- NEP-SPO-2008-08-14 (Sports & Economics)
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- Egon Franck & Erwin Verbeek & Stephan Nüesch, 2008.
"Prediction Accuracy of Different Market Structures – Bookmakers versus a Betting Exchange,"
0096, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2009.
- Franck, Egon & Verbeek, Erwin & Nüesch, Stephan, 2010. "Prediction accuracy of different market structures -- bookmakers versus a betting exchange," International Journal of Forecasting, Elsevier, vol. 26(3), pages 448-459, July.
- Egon Franck & Erwin Verbeek & Stephan Nüesch, 2008. "Prediction Accuracy of Different Market Structures – Bookmakers versus a Betting Exchange," Working Papers 0025, University of Zurich, Center for Research in Sports Administration (CRSA), revised 2009.
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