Does Sportsbook.com Set Pointspreads to Maximize Profits? Tests of the Levitt Model of Sportsbook Behavior

Authors: Paul, Rodney J.; Weinbach, Andrew P.

Source: The Journal of Prediction Markets, Volume 1, Number 3, December 2007 , pp. 209-218(10)

Publisher: University of Buckingham Press

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Abstract:

The Levitt (2004) model of sportsbook behavior is tested using actual percentages of dollars bet on NFL games from the internet sportsbook, Sportsbook.com. Simple regression results suggest that Sportsbook.com sets pointspreads (prices) to maximize profits, as the Levitt model assumes, not to balance the betting dollars, as the traditional model of sportsbook behavior assumes. Sportsbook.com is found to accept significantly more wagering dollars on road favorites, larger favorites, and on the over for the highest totals in the over/under betting market. Bettor liquidity constraints and sportsbook betting limits may help explain this result.

Keywords: EFFICIENT MARKETS; GAMBLING; SPORTS

Document Type: Research article

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