If the bookie sets the spread right, you’ll still place the bet, the Bulls can still win, and the bookie can still make money. A sports bookie might take the bet on the condition that the Bulls would have to win by, say, six points, or else you lose the bet. Say you want to place a bet on the Chicago Bulls, a National Basketball Association team. Through the application of a theoretical model, the researchers identify a set of policies, which they call inertial policies, that enable bookies to strike a balance between learning from market participants and bluff proofing their business. However, a clever bettor might place some phony bets to throw the bookie off. The bets being placed are the bookie’s best source of information-by analyzing betting patterns, a bookie can effectively crowdsource information about the expected outcome of an event. The researchers identify a key problem for bookies and financial market makers: they are vulnerable to being bluffed by knowledgeable bettors or bettors with inside information, such as whether a star is able to play. The findings may interest sports bettors and hedge-fund managers alike. Because the sports-betting market shares features with financial markets that rely on spreads―including credit default swaps and options―the implications of the research could apply far beyond the $4.9 billion-a-year Nevada sports-betting industry. Bora Keskin, and Uber’s Adam Schultz explore the dynamics of how a bookie can keep from being manipulated. Birge, Booth PhD candidate Yifan Feng, Duke’s N. But a bookie can be manipulated by a skillful bettor.Ĭhicago Booth’s John R. As bookies have to take the other side of every bet, they have to know what they’re doing. The predictions rely on available information about both sides as well as conditions that might affect the outcome.

A bettor has to pick a winning contestant, and a market maker―a bookie―bets on the opponent.

Sports-betting markets are based entirely on predictions.

How to make smart sports bets