The Liquidity Advantage of Quote-driven Markets: Evidence from the Betting Industry
AbstractThis paper investigates the puzzling coexistence of the quote-driven market struc- ture characterized by traditional bookmakers and the order-driven market structure characterized by betting exchanges in the betting industry. Even though betting exchanges are considered as the superior business model due to less operational risk and lower information costs, bookmakers continue to be successful. We show that liquidity, which is only guaranteed at the bookmaker market, significantly improves the bookmakers price competitiveness. Using matched panel data of both book- maker and betting exchange odds for 17,682 soccer matches played worldwide, we find that a major bookmaker offers more favorable odds than a major betting ex- change in the early pre-play betting period and less favorable odds shortly before match start.
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Bibliographic InfoPaper provided by University of Zurich, Department of Business Administration (IBW) in its series Working Papers with number 342.
Length: 24 pages
Date of creation: Dec 2013
Date of revision:
Market Structure; Market Performance; Liquidity; Betting Market;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-01-24 (All new papers)
- NEP-IND-2014-01-24 (Industrial Organization)
- NEP-MST-2014-01-24 (Market Microstructure)
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