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The Liquidity Advantage of the Quote-Driven Market: Evidence from the Betting Industry

Author

Listed:
  • Raphael Flepp

    () (Department of Business Administration, University of Zurich)

  • Stephan Nüesch

    () (Department of Business Administration, University of Zurich)

  • Egon Franck

    () (Department of Business Administration, University of Zurich)

Abstract

Even though betting exchanges are considered to be the superior business model in the betting industry due to less operational risk and lower information costs, bookmakers continue to be successful. We explain the puzzling coexistence of these two market structures with the advantage of guaranteed liquidity in the bookmaker market. Using matched panel data of over 1.8 million bookmaker and betting exchange odds for 17,410 soccer matches played worldwide, we find that the bookmaker offers higher odds and bettor returns than the betting exchange when liquidity at the betting exchange is low.

Suggested Citation

  • Raphael Flepp & Stephan Nüesch & Egon Franck, 2014. " The Liquidity Advantage of the Quote-Driven Market: Evidence from the Betting Industry," Working Papers 342, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:zrh:wpaper:342
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Market Structure; Liquidity; Betting Industry;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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