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Professional Bettors, Odds-Arbitrage Competition, And Betting Market Equilibrium



    (Advanced Digital Information Corporation, Redmond, WA, USA)


    (U.S. General Accounting Office, Washington, D.C., USA)


    (Department of Economics, University of Calgary, Canada)


A slew of empirical evidence on horse racetrack betting markets points to betting biases and market inefficiency. More recent empirical work has documented the absence of betting biases in racetrack betting markets characterized by a high volume of betting. This paper offers a competition-based model of betting behavior that is consistent with the pattern of betting biases reported in the literature. We postulate the existence of professional bettors who, being better informed and/or having different objectives than the general betting population, engage in odds arbitrage when doing so is profitable. We evaluate the case of a single odds-arbitraging bettor first in order to establish the fundamental properties of odds arbitrage. We then examine the effects of entry of professional bettors who play a Nash game in odds arbitrage; the results show that professionals' participation causes the final track odds to converge to the level implied by the horses' true win probabilities when there is a high volume of betting.

Suggested Citation

  • Brian R. Adams & Frank W. Rusco & W. David Walls, 2002. "Professional Bettors, Odds-Arbitrage Competition, And Betting Market Equilibrium," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 47(01), pages 111-127.
  • Handle: RePEc:wsi:serxxx:v:47:y:2002:i:01:n:s021759080200033x
    DOI: 10.1142/S021759080200033X

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    Cited by:

    1. M. Sung & J. E. V. Johnson, 2010. "Revealing Weak‐Form Inefficiency in a Market for State Contingent Claims: The Importance of Market Ecology, Modelling Procedures and Investment Strategies," Economica, London School of Economics and Political Science, vol. 77(305), pages 128-147, January.


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