Sports Betting
This article talks about sports betting. More specifically, it discusses the betting around the Premier League soccer games on online betting sites. The author of the article created an algorithm for predicting the results of Premier League soccer games. After comparing his algorithm’s predictions to an expert and finding that his algorithm’s predictions were 10% better, the author decided to take his algorithm to a betting site. On these sites, a bookmaker (bookie for short) takes bets, calculates odds, and pays out winnings. The article gives an example of such a game using the Tottenham vs Manchester United match. There are three possible outcomes: Tottenham wins, Manchester United wins, or they draw. The betting website also gives odds on each of these outcomes. European odds tell you how much you get back if you bet $1. For example, the odds on Bet 365 for Arsenal to win were 2.4. This means that for every dollar you put in and win the bet, you get 2.4 dollars back (a 1.4 profit). The odds for a Manchester United win were 3 and the odds for a draw were 3.6.
The article also mentions a term called the bookmakers advantage. This refers to the profit a bookmaker collects in a betting game. The way this was calculated in the article came from the odds of each outcome:
1/24 + 1/3 + 1/3.6 = 41.6% + 33.3% + 27.8% = 102.7%
The extra 2.7% is the bookmakers advantage. I found this somewhat difficult to understand where it comes from, so I decided to look more into where the bookman’s advantage comes from and I found the following means for a bookie to make a profit. In some betting sites, you have to bet $1100 for a $1000 bet. So if two players are on opposite sides waging for a $1000 bet, they both have to pay $1100. The winner gets back his $1100 plus the $1000 bet he just won and the extra $100 goes to the bookie. This is called the bookmakers advantage and without it, the online betting sites wouldn’t make any money and shut down.
Going back to the soccer betting site, to get the actual probability of each outcome we divide through by 102.7% and get that the probability of an Arsenal win is 40.5%, the probability of a Manchester United win is 32.5% and the odds of a draw are 27.1%. Like we did in class for many examples and payoffs, we can calculate the expected profit for betting on each of the outcomes. For example, the profit for betting $1 on Arsenal is the probability of Arsenal winning times the payoff = 0.405 * 2.4 + (1-0.405) * 0 = 0.97. However, 0.97 is the profit you would get for betting on Manchester United or even if you bet on a draw. Regardless, of the bet, the profit is the same in all the cases. This also means that on average, the bookmaker gets 3 cents per dollar bet and this is how they make a profit in this soccer betting site. I also found it interesting to get an insight into how the odds are decided. The odds that the bookies decided made it so that that the profit would be the same regardless of the outcome of the match and I found this insight into the bookmakers world in betting sites to be fascinating.