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Justin Wolfers speaks
Legalizing wagering on which team wins or loses a particular game, while banning all bets on immaterial outcomes like point spreads, would destroy the market for illegal bookmakers and make sporting events less corruptible by gamblers.
And:
Point shaving may be widespread enough to have occurred in around 1 percent of N.C.A.A. basketball games.
Here is the full argument, and thanks to Chris F. Masse for the pointer; Chris also points me to this new and possibly very important study (a senior thesis by Jonathan Gibbs, at times the link isn't working) of point shaving in the NBA.
Posted by Tyler Cowen on July 27, 2007 at 07:53 AM in Sports | Permalink
Comments
If you had larger officiating crews, and then a coin flip before the game as to who would referee, the ref and the bettors wouldn't be able to pick games to rig.
Posted by: bjk at Jul 27, 2007 8:15:50 AM
Legalizing wagering on which team wins or loses a particular game, while banning all bets on immaterial outcomes like point spreads, would destroy the market for illegal bookmakers
This is an odd conclusion.
Posted by: V at Jul 27, 2007 8:30:47 AM
um, aren't illegal bookies already illegal? How would banning bets on over/under or point spreads in Vegas all of a sudden make neighborhood bookies disappear?
He also seems to suggest that Congress should preempt all state regulation and make sports gambling legal across the US.
Posted by: redd at Jul 27, 2007 9:07:19 AM
I have an alternate suggestion: do nothing. The market - bettors - now know that the deck is stacked against them when betting point spreads, and should rationally avoid those kinds of bets going forward or at least expect some kind of premium for taking the additional risk that point spreads might be manipulated.
Limiting betting only on outcomes would make any nefarious behavior even more egregious as players or refs motivated to swing games would affect actual wins or losses rather than mere point spreads.
The only thing that needs to be done is what is already being done: exposing those guilty of shaving points to alert the market that risks are involved.
Posted by: fustercluck at Jul 27, 2007 9:15:43 AM
In other words:
What's worse - another Tim Donaghy scandal or another Black Sox scandal?
Posted by: fustercluck at Jul 27, 2007 9:18:20 AM
Who cares what he thinks about gambling? Talk to him about Dylan sometime.
Posted by: James at Jul 27, 2007 10:24:44 AM
The trouble with Wolfers' suggestion is that he ignores the reason betting on point spreads exists: a very large percentage of football and basketball games are mismatches. Win/loss betting is unattractive in these situations, so if you want to generate betting you have to use something like point spreads.
Note that betting on baseball games is, in general, win/loss with odds. That's because there's a reasonable chance that Tampa Bay will beat Boston in a single game.
Posted by: Bernard Yomtov at Jul 27, 2007 10:29:25 AM
A parimutuel set-up would allow for economically attractive win-loss betting. Well, the house still takes a piece of the action, so gamblers are losing on net, but it can balance the gamble without employing a point spread on all but the most unbalanced games.
Posted by: Mike KP at Jul 27, 2007 12:18:27 PM
Important? Basketball as entertainment seems to me to be wasteful in the context of the challenges the face and the resources we need to solve them. Although I suppose it's an empirical question whether basketball overall helps maximize our productivity.
Posted by: Hopefully Anonymous at Jul 27, 2007 12:33:35 PM
MikeKP,
But odds-setting by bookmakers is an attempt to simulate pari-mutuel betting. That this isn't done in basketball and football suggests that it not sufficiently attractive to gamblers to justify the effort. That seems plausible to me. If team X has an 80% chance to beat Y, then the payoff to betters on X would have to be 1 to 4 (minus some amount). I suspect that many gamblers find that kind of low payoff unappealing, even if fair.
Also, the high odds that would have to be offered to attract bets on serious underdogs may pose unacceptable risks for bookmakers.
Posted by: Bernard Yomtov at Jul 27, 2007 12:47:03 PM
Eliminating point spreads would do nothing. For one thing most baseball bets are based on odds (i.e. "170" means bet 170 to win 100). Furthermore there is a similar "money line bet for other sports.
Posted by: Rebunga at Jul 27, 2007 1:55:51 PM
I don't understand Bernard. Wouldn’t a bookmaker be able to achieve the same result using odds instead of using point spreads? From the bookmaker’s perspective, is it not two ways to achieve the exact same result?
Posted by: Whit Stevens at Jul 27, 2007 2:06:50 PM
Rebunga: I think the idea is that removing point spreads would destroy player's incentives to under perform on purpose in order to capitalize on the spread. Bookmakers could use money lines or odds instead of point spreads to balance there books.
Posted by: Whit Stevens at Jul 27, 2007 2:09:23 PM
Whit,
The point is that there is not much of a market for a bet on sure things. If the best NBA team will beat the worst NBA team almost every time, there are very few people who want to place a $100 for a 99% chance of a $101 return. Depending on the house's cut, it might not be worthwhile to take the bets at all.
Also, depending on the size of the bookie's clientelle, you might not find anyone willing to take the extreme-underdog bet, leaving all the risk on the house.
Posted by: Rich B. at Jul 27, 2007 2:17:58 PM
Another possible problem with an odds bet, in football at least, is that several days go by between the posting of the spread, or odds, and the game. During that time things like injuries can occur, or the betting can go in an unexpected way, causing the initial posting to be inaccurate. Spreads can be changed, though not without risk, but changing odds is a disaster. The bookmaker is handing out money to those on one side of the initial bet.
I have read that there are odds bets, "money line bets," as rebunga calls them, for sports other than baseball, but they are hardly as popular as point spread bets.
Posted by: Bernard Yomtov at Jul 27, 2007 3:20:55 PM
Point spreads make betting easier. The amount of betting on a particular game has a direct correlation with viewership (if a game is a blowout in the 3rd quarter, only gamblers are watching). Leagues have no interest in preventing or stopping any forms of betting.
Many have argued that the NHL is going to die without a better officiating system because the current system is too questionable for most gamblers to wager seriously.
Posted by: Steve Roberts at Jul 27, 2007 3:21:52 PM
Taking away point spread would also take away the incentive for a player to under-perform just enough to affect the spread. The implicit assumption (one of them) may be that the player would not want to throw away a whole game, but could be easily induced to affect the spread given the outcome is not at stake.
Posted by: HeShootsAndScores at Jul 27, 2007 5:08:24 PM
Wherever there is an extra dollar to be made, there will be a market for it.
The very fact that some types of gambling would still be illegal would actually create a market for those activities.
A small time bookie without the means to enter the legal gambling business would find a way to lure bettors to his services, illegal though they may be.
Posted by: Ray G at Jul 27, 2007 9:25:47 PM
Bernard,
I've never bet, but I'm fairly certain that bettors get fixed spreads from the house. For example, the house can move a spread from 5.5 to 4.5, but the person who bets 5.5 will keep that spread.
The house can give fixed spreads because spreads are created to keep the money 50/50. If an injury makes gives the other team 10 extra points, the house won't lose any money on the old bets since they collect as much on the losing side as they pay out on the winning side. The same thing happens with fixed odds, but with the expected payouts 50/50 instead.
Posted by: Matthew at Jul 28, 2007 5:19:29 AM
Matthew,
You are correct that the spread at which an earlier bet is made does not change when the spread moves. Aside from injuries and the like, the spread will move when the house misjudges and betting is unbalanced. So the house is at risk there, having an unbalanced set of bets at a 5.5 point spread, in your example. An additional risk is that some betters will get a "middle." Suppose you bet on X, a six point underdog. Then the spread moves to four. You can now bet on the favorite and possibly win both sides. I don't know if middles are profitable on average to the betters, but I do know they love them.
With odds betting the situation is a litle different. If I bet $100 on the underdog at 3-1, and the odds then go to 2-1, I can make a new bet of $267 on the favorite for a sure profit of $33. So changing the odds does surrender an arbitrage profit (if they are changed enough to overcome the "vigorish.")
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