Time to Unbridle U.S. Thoroughbred Racetracks? Lessons from Australian Bookies

Time to Unbridle U.S. Thoroughbred Racetracks? Lessons from Australian Bookies We consider a policy reform that would relax price controls in American pari-mutuel wagering on horse racing by examining bookie behavior in Australia’s fixed-odds gambling sector. Descriptive regressions indicate that bookmaker takeouts (the effective prices of races) vary substantially and systematically with race characteristics, though in sometimes counterintuitive ways. Estimates of an explicitly reduced form model of bookie takeout, however, can qualitatively match both intuition and prior findings in the literature. Counterfactuals that use these estimates suggest that regulatory reform that permits racecourses to alter takeout across races would increase variable profit by about 5 %. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Time to Unbridle U.S. Thoroughbred Racetracks? Lessons from Australian Bookies

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Publisher
Springer US
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-014-9418-z
Publisher site
See Article on Publisher Site

Abstract

We consider a policy reform that would relax price controls in American pari-mutuel wagering on horse racing by examining bookie behavior in Australia’s fixed-odds gambling sector. Descriptive regressions indicate that bookmaker takeouts (the effective prices of races) vary substantially and systematically with race characteristics, though in sometimes counterintuitive ways. Estimates of an explicitly reduced form model of bookie takeout, however, can qualitatively match both intuition and prior findings in the literature. Counterfactuals that use these estimates suggest that regulatory reform that permits racecourses to alter takeout across races would increase variable profit by about 5 %.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 29, 2014

References

  • The favourite-longshot bias, bookmaker margins and insider trading in a variety of betting markets
    Cain, M; Law, D; Peel, D
  • Surprised by the parimutuel odds?
    Ottaviani, M; Sorensen, PN
  • Noise, information, and the favorite-longshot bias in parimutuel predictions
    Ottaviani, M; Sorensen, PN

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