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 Sentimental Preferences and the Organizational Regime of Betting Markets

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Author Info

  • Â Egon Franck

    (Institute for Strategy and Business Economics, University of Zurich)

  • Â Erwin Verbeek

    (Institute for Strategy and Business Economics, University of Zurich)

  • Â Stephan Nuesch

    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

 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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File URL: http://repec.business.unizh.ch/RePEc/iso/ISU_WPS/89_ISU_full.pdf
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Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0089.

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Length: 28
Date of creation:
Date of revision: 2010
Handle: RePEc:iso:wpaper:0089

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Keywords: betting; market structure; sentiment; price elasticity;

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Cited by:
  1. Egon Franck & Erwin Verbeek & Stephan Nüesch, 2008. "Prediction Accuracy of Different Market Structures – Bookmakers versus a Betting Exchange," Working Papers 0096, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2009.
  2. Raphael Flepp & Stephan Nüesch & Egon Franck, 2013. " The Liquidity Advantage of Quote-driven Markets: Evidence from the Betting Industry," Working Papers 342, University of Zurich, Department of Business Administration (IBW).
  3. Babatunde Buraimo & David Peel & Rob Simmons, 2013. "Systematic Positive Expected Returns in the UK Fixed Odds Betting Market: An Analysis of the Fink Tank Predictions," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(4), pages 168-182, December.
  4. Raphael Flepp & Stephan Nüesch & Egon Franck, 2013. " Liquidity, Market Efficiency and the Influence of Noise Traders: Quasi-Experimental Evidence from the Betting Industry," Working Papers 341, University of Zurich, Department of Business Administration (IBW).

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