3 ms·

There is an analogous situation in (e.g. sports) betting. Every now and then someone places a really long bet on something like Leicester winning the Premiershi

by Y_Y 3y ago

There is an analogous situation in (e.g. sports) betting. Every now and then someone places a really long bet on something like Leicester winning the Premiership and then gets a collosal payout. Inevitably there's some naive speculation that the betting shop will be very unhappy with this. In reality theae u likely events happen relatively infrequently (often disproportionately to even their long odds) and the publicity from such an unlikely win more than makes up for the payout.

randall 3y ago
So big payouts become an organic marketing expense. Clever!
bluelightning2k 3y ago
Problem with this: an individual betting shop pays out, the sales lift is shared among the entire industry. Concentrated downside, distributed upside. I doubt the individual bookie is happy.
- Majromax 3y ago
  Proper betting shops are market makers, ideally balancing their books such that they profit by the house spread regardless of outcomes. A bookie that takes on a substantial net position is accidentally gambling with their own money.
- gtirloni 3y ago
  I'm not familiar with betting in general but is there even a bookie this days? Or is that a company (one of the thousands flooding social media with ads lately)? It seems, like in other industries, being large helps to weather out such rare events.
- htrp 3y ago
  Most "individual betting shops" are a sales agent where the actual "book" is run through bet365/paddypower (at least the ones aboveboard in the UK).
dmurray 3y ago
The odds did tighten up after Leicester won the Premier League though. You couldn't get 5000-1 on say Watford winning in 2016-17, the best odds IIRC were more like 500-1. It seemed like bookies really did adjust their expectations or their risk appetite for long-tail events in this market. And they were probably correct to do so.
- octodog 3y ago
  Or, cynically, their original odds were right but they have taken the opportunity to reduce payouts because punters now consider that event more likely and thus would accept less.
- flakeoil 3y ago
  Are those two events/teams comparable so that one could expect the same type of odds? I'm not much into betting, but will not the odds change also based on how people are betting. So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically?
  - dmurray 3y ago
    > Are those two events/teams comparable so that one could expect the same type of odds? Yes IMO. It might be more rigorous to say: before 2016 there were always a handful of teams priced at 5000-1, after 2016 there were not. The league didn't objectively get more competitive. > So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically Definitely possible, and would explain the effect regardless of whether the punters were smart money Nicholas Taleb types who spotted that black swans were systematically underpriced, or gamblers dreaming of another Leicester payday.
- TheCoelacanth 3y ago
  It's less of an indication of bookies' predictions and more of an indicator of bettors' predictions. A bookie isn't trying to gamble on the outcome; they're trying to get the bets to all balance out so that no matter what the outcome they take in enough money from the losers to pay the winners with some profit leftover. As more people bet on a specific outcome, they will lower the odds to make sure that the pool of money taken in is still big enough to pay out if that outcome happens.
sokoloff 3y ago
Chris Moneymaker* winning the 2003 World Series of Poker main event after winning his entry in an $86 online qualifying tournament (rather than paying the $10K entry fee from his own pocket) was the biggest thing that could have happened for poker. * - Yes, that's really his name: https://en.wikipedia.org/wiki/Chris_Moneymaker https://en.wikipedia.org/wiki/Chris_Moneymaker
- Horffupolde 3y ago
  It’s not random. It’s called the Crentist effect or nominative determinism.
User23 3y ago
Ideally the bookie is acting as a broker and not directly making a market. Theoretically if they’re accepting bets for Leicester winning the Premiership at 5000-1, they’re also accepting bets that amount to that not happening at offsetting odds.
whartung 3y ago
The corollary is the scenes from the movie “The Grifters” where one aspect of Angelica Huston’s character is she goes to tracks to put large bets on long shots to lower the impact on the mobs illegal bookmaking system, in case the horse actually wins. It’s not mentioned in the movie. I have to guess that they only do that if there is a large bet pending, rather doing it to all the long shot horses. Some gambler dropping a 10k bet, and have her put $1k on the horse is enough to really rock the odds. Perhaps, mob accounting is not my specialty. And, of course, it’s just a movie.

by Y_Y 3y ago

randall 3y ago

So big payouts become an organic marketing expense. Clever!

bluelightning2k 3y ago

Problem with this: an individual betting shop pays out, the sales lift is shared among the entire industry. Concentrated downside, distributed upside. I doubt the individual bookie is happy.

Majromax 3y ago
Proper betting shops are market makers, ideally balancing their books such that they profit by the house spread regardless of outcomes. A bookie that takes on a substantial net position is accidentally gambling with their own money.
gtirloni 3y ago
I'm not familiar with betting in general but is there even a bookie this days? Or is that a company (one of the thousands flooding social media with ads lately)? It seems, like in other industries, being large helps to weather out such rare events.
htrp 3y ago
Most "individual betting shops" are a sales agent where the actual "book" is run through bet365/paddypower (at least the ones aboveboard in the UK).

dmurray 3y ago

The odds did tighten up after Leicester won the Premier League though. You couldn't get 5000-1 on say Watford winning in 2016-17, the best odds IIRC were more like 500-1. It seemed like bookies really did adjust their expectations or their risk appetite for long-tail events in this market. And they were probably correct to do so.

octodog 3y ago
Or, cynically, their original odds were right but they have taken the opportunity to reduce payouts because punters now consider that event more likely and thus would accept less.
flakeoil 3y ago
Are those two events/teams comparable so that one could expect the same type of odds? I'm not much into betting, but will not the odds change also based on how people are betting. So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically?
- dmurray 3y ago
  > Are those two events/teams comparable so that one could expect the same type of odds? Yes IMO. It might be more rigorous to say: before 2016 there were always a handful of teams priced at 5000-1, after 2016 there were not. The league didn't objectively get more competitive. > So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically Definitely possible, and would explain the effect regardless of whether the punters were smart money Nicholas Taleb types who spotted that black swans were systematically underpriced, or gamblers dreaming of another Leicester payday.
TheCoelacanth 3y ago
It's less of an indication of bookies' predictions and more of an indicator of bettors' predictions. A bookie isn't trying to gamble on the outcome; they're trying to get the bets to all balance out so that no matter what the outcome they take in enough money from the losers to pay the winners with some profit leftover. As more people bet on a specific outcome, they will lower the odds to make sure that the pool of money taken in is still big enough to pay out if that outcome happens.

sokoloff 3y ago

Chris Moneymaker* winning the 2003 World Series of Poker main event after winning his entry in an $86 online qualifying tournament (rather than paying the $10K entry fee from his own pocket) was the biggest thing that could have happened for poker. * - Yes, that's really his name: https://en.wikipedia.org/wiki/Chris_Moneymaker https://en.wikipedia.org/wiki/Chris_Moneymaker

Horffupolde 3y ago
It’s not random. It’s called the Crentist effect or nominative determinism.

User23 3y ago

Ideally the bookie is acting as a broker and not directly making a market. Theoretically if they’re accepting bets for Leicester winning the Premiership at 5000-1, they’re also accepting bets that amount to that not happening at offsetting odds.

whartung 3y ago

The corollary is the scenes from the movie “The Grifters” where one aspect of Angelica Huston’s character is she goes to tracks to put large bets on long shots to lower the impact on the mobs illegal bookmaking system, in case the horse actually wins. It’s not mentioned in the movie. I have to guess that they only do that if there is a large bet pending, rather doing it to all the long shot horses. Some gambler dropping a 10k bet, and have her put $1k on the horse is enough to really rock the odds. Perhaps, mob accounting is not my specialty. And, of course, it’s just a movie.