That's more or less how a sportsbook operates. However if the action doesn't balance out, the book has considerable exposure if the team with more bets on it wins.
Model totally sucked against betting odds and if you used the model probabilities to price bets you would have lost a lot of money vs even an average bookmaker.
Score it yourself against implied probabilities from Betfair for example and marvel at the suckage.
I can see a potential problem here in that a sizeable win from a random bet is likely to encourage some people to keep making these bets in future, with inevitable consequences.
That's interesting. You're looking at it from the point of view of the bettor. My concern is just that non-dominant lines of inquiry are already intensely selected against and this just institutionalizes that bias. But I see your point that the lopsided upside incentivizes contrarians. That's very interesting .. I have to think about that!
I think betting markets are prone to wishful thinking; there's no guarantee that errors of reasoning toward one side or the other will cancel out, since it's perfectly reasonable to imagine that errors in one direction are more common.
There will always be some pressure from people or groups betting against the seemingly inevitable as they can get highs returns if things don’t happen as the crowd predicts.
Is there any possibility of unwinding the distortion caused by site fees, time-value issues, and other market imperfections to recover the true odds implied by the betting markets, or is it just too complicated for that to be feasible?
This article makes the rather optimistic assumption that bookie prices efficiently and purely represent probabilistic models. This isn't quite the truth, as many bookies can and do take a position against the weight of money (punters often bet disproportionately and according to some psychology). There's also the juice to consider, particularly for underdogs, where value is quickly eroded.
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?
I ran a project in this area for a few years, and saw significant issues. For example, for high-stakes predictions (eg elections) we saw significant gaming because people see it as an opportunity to move the media narrative.
We've seen this in the current US Presidential Elections, with big swings in betting markets for the presidential outcome itself, without the same swings in related outcomes (eg, you see a swing in the price for "the winning president is X" without the price for "X gets above 270 electoral votes changing at all")
Obviously this creates arbitrage opportunities, but the media narrative is the real issue. Have you considered this problem at all?
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