Sentimental Preferences and the Organizational Regime of Betting Markets

31 Pages Posted: 16 Nov 2010 Last revised: 25 Oct 2011

See all articles by Egon P. Franck

Egon P. Franck

University of Zurich - Department of Business Administration (IBW)

Erwin Verbeek

University of Zurich - Department of Business Administration (IBW)

Stephan Nüesch

University of Muenster

Date Written: February 16, 2010

Abstract

We analyze the price impact of sentimental bettor preferences within a bookmaker betting market. Our model demonstrates that, under reasonable assumptions about the nature of demand in a market with strong competition, the bookmaker will offer lower prices for bets with comparatively stronger demand. Using a sample of more than 16,000 English soccer matches we find evidence that more favorable odds are extended to bets on more popular clubs and that this effect is amplified on weekends when sentimental bettors face lower opportunity costs to wager. Our findings help to explain why the market for sports gambling operates as a hybrid structure with bookmakers able to attract a considerable share of the betting volume although identical contracts are traded on exchange markets at lower costs; the organizational design of a quote-driven market enables the dealer to take advantage of sentimental bettor preferences.

Suggested Citation

Franck, Egon P. and Verbeek, Erwin and Nüesch, Stephan, Sentimental Preferences and the Organizational Regime of Betting Markets (February 16, 2010). Southern Economic Journal, Vol. 78, pp. 502-518, 2011, Available at SSRN: https://ssrn.com/abstract=1710072

Egon P. Franck

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich 8032
Switzerland
+41 1 634 28 45 (Phone)

Erwin Verbeek

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Stephan Nüesch (Contact Author)

University of Muenster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/uf

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