Behavioral Biases and Sportsbook Pricing in Major League Baseball

Rodney J. Paul, Andrew P. Weinbach

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

This article discusses the literature that uses sports gambling markets as an analogy to financial markets. It also expands the study of actual sportsbook behavior, comparing the traditional models to the Levitt hypothesis and considering alternative theories, by examining the betting market for Major League Baseball (MLB). The reverse favorite-longshot bias and home/road biases are then explored. It appears that bettors prefer road favorites by a large margin, but this is not captured by the sportsbook odds, which, likely not coincidentally, tend to map closer to actual favorite win percentages. There are no statistically significant returns to betting against the public. The findings that sportsbooks do not set prices to balance the book calls into question the source of some of the earlier findings of market efficiency in sports wagering markets and its underlying support for the forecasting power of prediction markets.

Original languageEnglish (US)
Title of host publicationEconomics Through Sports
PublisherOxford University Press
Volume2
ISBN (Electronic)9780199940868
ISBN (Print)9780195387780
DOIs
StatePublished - Sep 18 2012
Externally publishedYes

Keywords

  • Betting
  • Bias
  • Financial markets
  • Levitt hypothesis
  • Major league baseball
  • Sports gambling
  • Sportsbooks

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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  • Cite this

    Paul, R. J., & Weinbach, A. P. (2012). Behavioral Biases and Sportsbook Pricing in Major League Baseball. In Economics Through Sports (Vol. 2). Oxford University Press. https://doi.org/10.1093/oxfordhb/9780195387780.013.0017