Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296690 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
UCD Centre for Economic Research Working Paper Series No. WP23/16
Publisher: 
University College Dublin, UCD School of Economics, Dublin
Abstract: 
We describe how the presence of insiders with superior information about potential outcomes of sporting events affects odds set by bookmakers, using a generalized version of the model in Shin (1991). The model has been widely cited as an explanation for the pattern of favorite-longshot bias observed in fixed-odds betting markets. We show that disagreement among those bettors without inside information causes favorite-longshot bias. The presence of insiders reduces odds but does not necessarily exacerbate favorite-longshot bias. For realistically calibrated beliefs, the fraction of insiders has a minimal effect on the ratio of favorite to longshot odds and the betting market collapses if this fraction rises above low levels.
Subjects: 
Sports Betting
Inside Information
JEL: 
G14
L83
Z20
Document Type: 
Working Paper

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