Optimal pricing in the online betting market

Maurizio Montone

Journal of Economic Behavior & Organization, 2021, vol. 186, issue C, 344-363

Abstract: I find that the optimal price of a bet for a risk-averse bookmaker is a function of elasticity of demand and the number of outcomes of the betting event. In the presence of shocks to the order flow, however, the optimal price can change, and large adjustments can create arbitrage opportunities for informed investors. Using a large sample of online bookmakers and a unique data set of real-time betting odds, I find strong support for these predictions. Overall, the results shed new light on the efficiency of online betting prices.

Keywords: Betting market; Market efficiency; Risk aversion; Arbitrage (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:186:y:2021:i:c:p:344-363

DOI: 10.1016/j.jebo.2021.04.007

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