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The Optimality and Statistical Detection of Price Rigging in Betting Markets

Author

Listed:
  • Adi Schnytzer

    (Department of Economics, Bar-Ilan University)

  • Yuval Shilony

Abstract

The purpose of this paper is to determine empirically whether or not there is systematic price rigging in three Australian betting markets: Horse, harness and greyhound racing. We present a simple model which shows the conditions under which it is optimal for insiders to rig prices by deliberate underperformance in some races. We then show how an empirical analysis of the relationship between win and place probabilities in conjunction with observed patterns of betting behavior, may be used to establish the presence of price rigging. It is shown that there is no significant systematic price rigging in these markets.

Suggested Citation

  • Adi Schnytzer & Yuval Shilony, 2007. "The Optimality and Statistical Detection of Price Rigging in Betting Markets," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 1(1), pages 13-29, February.
    • Handle: RePEc:buc:jgbeco:v:1:y:2007:i:1:p:13-29
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    References listed on IDEAS

    as
    1. Figlewski, Stephen, 1979. "Subjective Information and Market Efficiency in a Betting Market," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 75-88, February.
    2. Brian A. Jacob & Steven D. Levitt, 2003. "Rotten Apples: An Investigation of the Prevalence and Predictors of Teacher Cheating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 843-877.
    3. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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