{"title":"Optimal Pricing in the Online Betting Market","authors":"M. Montone","doi":"10.2139/ssrn.2199035","DOIUrl":null,"url":null,"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 in 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. The results suggest that bookmakers' attitude towards risk is a key driver of prices in the betting market.","PeriodicalId":18611,"journal":{"name":"Microeconomics: General Equilibrium & Disequilibrium Models of Financial Markets eJournal","volume":"49 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2020-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Microeconomics: General Equilibrium & Disequilibrium Models of Financial Markets eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2199035","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 1
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 in 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. The results suggest that bookmakers' attitude towards risk is a key driver of prices in the betting market.
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