Costs, biases and betting markets: new evidence
AbstractIn recent years, person-to-person wagering on Internet ‘betting exchanges’ (sometimes known as ‘matched betting’) has become an increasingly important medium for betting on horse racing, sports and special events. Established gambling operators have argued that betting exchanges should not be allowed on the grounds that they represent unfair competition. In this paper, we argue that, in fact, betting exchanges have brought about reductions in traditional market biases and significant efficiency gains by lowering transaction costs for consumers. As such, the growth of exchange betting should be viewed as a welcome and innovatory phenomenon whereby allocative efficiency in the gambling market is improved. We test this hypothesis using data on UK horse racing from betting exchanges and from traditional betting media. We find a monotonic negative relationship between transaction costs and market efficiency. Further, in contrast to traditional betting media, we find that betting exchanges exhibit both weak and strong form market efficiency.
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Bibliographic InfoPaper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2004/5.
Date of creation: Sep 2004
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matched betting; betting exchanges; market efficiency; favourite-longshot bias.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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- Wikipedia:Articles for deletion/Log/2010 February 21 in Wikipedia English ne '')
- Wikipedia:Articles for deletion/Matched betting in Wikipedia English ne '')
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