Optimal Determination of Bookmakers' Betting Odds: Theory and Tests

John Fingleton and Patrick Waldron
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Patrick Waldron: Postal: Department of Economics, Trinity College, Dublin 2, Ireland

Economics Technical Papers from Trinity College Dublin, Economics Department

Abstract: This paper develops a theoretical model of how bookmakers' odds are determined, given varying levels of inside information on the part of punters. Bookmakers' attitudes towards risk and the degree of competition between them will influence bookmaker behaviour. Using a data set of 1,696 races in Ireland in 1993, we find that bookmakers are extremely risk-averse, and estimate that operating costs and monopoly rents combined account for up to 4 per cent of turnover and that between 3.1 and 3.7 per cent of betting is by punters with inside information.

JEL-codes: D82 G13 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduet:969

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