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Disagreement and Market Structure in Betting Markets: Theory and Evidence from European Soccer

Tadgh Hegarty and Karl Whelan

MPRA Paper from University Library of Munich, Germany

Abstract: Online sports betting is growing rapidly around the world. We describe how the competitive structure of the bookmaking market affects odds when bettors disagree about the probabilities of the outcomes of sporting events but are on average correct. We show that the demand for bets on longshots is less sensitive to the odds than bets on favorites. This means monopolistic bookmakers will set odds exhibiting favorite-longshot bias while competitive bookmaking markets will not have this feature. We develop a version of the model for soccer matches and use these results to explain empirical findings on odds for over 80,000 European soccer games from two different bookmaking markets.

Keywords: Favorite-Longshot Bias; Monopoly; Sports Betting (search for similar items in EconPapers)
JEL-codes: D42 G14 L83 (search for similar items in EconPapers)
Date: 2023-05-08
New Economics Papers: this item is included in nep-com and nep-spo
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https://mpra.ub.uni-muenchen.de/117243/1/Monopoly.pdf original version (application/pdf)

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Working Paper: Disagreement and Market Structure in Betting Markets: Theory and Evidence from European Soccer (2023) Downloads
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