IJSF Issue 3:3

Contents for IJSF Issue 3:3

Guest Editor’s Introduction: Sport Finance and Gambling, pp. 135-136
Authors: Brad R. Humphreys
Abstract:Gambling on sports is a big business, and in North America it has evolved during the past few decades from a shady, quasi-legal activity to a widely accepted recreational activity. As with any big business, gambling on sports has a number of important financial and economic implications. This special issue of the International Journal of Sport Finance explores several important financial and economic issues related to sports gambling.

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Price Setting in the NBA Gambling Market: Tests of the Levitt Model of Sportsbook Behavior, pp. 137-145
Authors: Rodney J. Paul and Andrew P. Weinbach
Abstract:Levitt (2004) suggested that sportsbooks do not set prices in the NFL to clear markets, as was commonly assumed, but set prices to maximize profits. This paper uses actual betting data from four sportsbooks to test the Levitt (2004) hypothesis in the NBA. For a sample of the 2004-05 to 2006-07 seasons, it is shown that favorites receive a disproportionate share of NBA pointspread bets. In addition, the percentage of bets the favorite receives increases with each additional point of the pointspread. In the totals market, it is shown that overs receive a much higher percentage of bets compared to unders and the percentage bet on the over increases with each point of the total. Unlike the NFL, however, taking a contrarian position and betting against public sentiment is not found to win more often than implied by efficiency.

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Do Sports Fans Really Value Uncertainty of Outcome? Evidence from the English Premier League, pp. 146-155
Authors: Babatunde Buraimo and Rob Simmons
Abstract:After controlling for a number of plausible influences on matchday attendance in the English Premier League, and with appropriate recognition of the censoring problem in stadium capacities, we find clear evidence that an increase in uncertainty of outcome is associated with reduced gate attendance. The conventional uncertainty of outcome hypothesis proposes precisely the opposite effect. We interpret this as suggesting that fans at EPL games, who are predominantly supporters of the home team, prefer to see their team play a much inferior team (and beat that team) rather than attend a game that is predicted to be close in score. Essentially, home fans prefer to see their team win rather than watch a draw or see the home team defeated.

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“Say It Ain’t So”: Betting-Related Malpractice in Sport, pp. 156-166
Authors: David Forrest, Ian McHale, and Kevin McAuley
Abstract:The paper identifies key changes in the betting environment that have raised risks to the integrity of sport. The risks are discussed in the context of a model where potential fixers evaluate the costs and benefits to them of engaging in manipulation of events on the field for betting gain. Using this framework, particular markets and situations are indicated as especially susceptible to corruption and these predictions appear to be consistent with the set of cases that have been exposed in contemporary sport. Possible policy responses are discussed.

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Football Pool Sales: How Important Is a Football Club in the Top Division?, pp. 167-176
Authors: Jaume García, Leví Pérez, and Plácido Rodríguez
Abstract:Having a top professional sport team in a geographical area has many potential economic impacts. In this paper we analyze the effect of having a professional football team in the Spanish First or Second Division in a certain province on the amount of sales of football pools in Spain (La Quiniela). To carry out the empirical exercise we estimate a demand equation using a panel data set at the provincial level for the years 1985-2005, merging the traditional economic models in the lotto demand literature: the effective price model and the jackpot model. Our results show that having a club in the top divisions has a significant effect on sales of La Quiniela. Moreover, previous results using fixture (round) data are confirmed in this paper. We also provide evidence showing La Quiniela bets to be a normal good and, as an implicit tax, regressive.

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Book Review: Economics, Uncertainty, and European Football, by Loek Groot, pp. 177-179
Authors: Arne Feddersen
Abstract:One of the central particularities in sports leagues is the fact that the clubs compete with each other on the input markets but are obliged to cooperate on the output market (i.e., the league¡¯s games). In order to maximize jointly produced league output, one often hears calls for policy changes to ensure optimal competitive balance in leagues. Supporters of these policy changes often argue that the dominance of one, or a few, teams will lead to unequal revenues across clubs, consolidation of the clubs¡¯ level of relative sporting performance, and thus to a helix of sporting and economic success. At the end of this process stands a loss in attractiveness of the league and hence a loss of revenues for all clubs and the league as a whole. In the extreme case, the existence of the league will be endangered. In order to avoid this spiral, many sports leagues have created rules and instruments to provide for financial and/or competitive balance across individual teams. These include the sharing of revenues, reserve clauses and/or drafting systems, and salary caps with the aim of maintaining the uncertainty of outcome that is seen to be substantial for fan interest.

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