The Liquidity Advantage of the Quote-Driven Market: Evidence from the Betting Industry
University of Zurich, Department of Business Administration, UZH Business Working Paper No. 342
27 Pages Posted: 23 Dec 2013 Last revised: 16 Oct 2014
Date Written: October 1, 2014
Even though betting exchanges are considered to be the superior business model in the betting industry due to less operational risk and lower information costs, bookmakers continue to be successful. We explain the puzzling coexistence of these two market structures with the advantage of guaranteed liquidity in the bookmaker market. Using matched panel data of over 1.8 million bookmaker and betting exchange odds for 17,410 soccer matches played worldwide, we find that the bookmaker offers higher odds and bettor returns than the betting exchange when liquidity at the betting exchange is low.
Keywords: Market Structure, Liquidity, Betting Industry
JEL Classification: D40, L10, L83
Suggested Citation: Suggested Citation