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Sentimental Preferences and the Organizational Regime of Betting Markets

  • Egon Franck

    ()

    (University of Zurich, Institute for Strategy and Business Economics, Plattenstrasse 14, 8032 Zurich)

  • Erwin Verbeek

    ()

    (University of Zurich, Institute for Strategy and Business Economics, Plattenstrasse 14, 8032 Zurich)

  • Stephan Nüesch

    ()

    (University of Zurich, Institute for Strategy and Business Economics, Plattenstrasse 14, 8032 Zurich)

We analyze the price impact of sentimental bettor preferences within a bookmaker betting market. A theoretical 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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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 78 (2011)
Issue (Month): 2 (October)
Pages: 502-518

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Handle: RePEc:sej:ancoec:v:78:2:y:2011:p:502-518
Contact details of provider: Web page: http://www.southerneconomic.org/

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