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An Empirical Examination of the Parimutuel Sports Lottery Market versus the Bookmaker Market

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  • Jaiho Chung
  • Joon Ho Hwang

Abstract

A sports lottery in Korea presents a unique opportunity for comparing a parimutuel‐type sports lottery market against a bookmaker market outside the realm of horse racing. Using two‐ and three‐game soccer final‐score betting in the sports lottery market in Korea, which features matches in the English Premier League, we compare winning payoffs in this parimutuel‐type sports lottery against corresponding payoffs from an established bookmaker market in the United Kingdom. We find that for outcomes with relatively high payouts (that is, lower‐probability events), winning bets placed in the sports lottery market have greater payoffs than corresponding bets placed in the bookmaker‐based market. However, the opposite is true for outcomes with relatively low payouts (that is, higher‐probability events). Results suggest that participants in the sports lottery market tend to bet more toward high‐probability events than the amount implied by the bookmaker's odds. Results also suggest that the favorite‐longshot bias is still present in the bookmaker market, even when there is less threat of privately informed bettors than in horse racing.

Suggested Citation

  • Jaiho Chung & Joon Ho Hwang, 2010. "An Empirical Examination of the Parimutuel Sports Lottery Market versus the Bookmaker Market," Southern Economic Journal, John Wiley & Sons, vol. 76(4), pages 884-905, April.
    • Handle: RePEc:wly:soecon:v:76:y:2010:i:4:p:884-905
    DOI: 10.4284/sej.2010.76.4.884
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