What drives intermediation costs? A case of tennis betting market

Štefan Lyócsa and Igor Fedorko

Applied Economics, 2016, vol. 48, issue 22, 2037-2053

Abstract: We demonstrate that there is a considerable variation in bookmaker margins across matches, time and bookmakers. Our results imply that using match, tournament and players’ characteristics explains the variations in margins hence, they can be helpful in managing intermediation cost in a market of state-contingent assets: fixed-odds betting markets. We also provide evidence that bookmakers protect themselves by increasing odds on the favourite player, thus attracting more bettors to the favourite player, while deterring bettors from betting on the underdog by reducing the odds. By that process, bookmakers are possibly sacrificing a portion of their margin.

Date: 2016
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DOI: 10.1080/00036846.2015.1111993

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