When the Odds Are News
The bookies can change their odds whenever they want, completely at their own discretion.
Daniel Altman is Big Think's Chief Economist and an adjunct faculty member at New York University's Stern School of Business. Daniel wrote economic commentary for The Economist, The New York Times, and The International Herald Tribune before founding North Yard Economics, a non-profit consulting firm serving developing countries, in 2008. In between, he served as an economic advisor in the British government and wrote four books, most recently Outrageous Fortunes: The Twelve Surprising Trends That Will Reshape the Global Economy.
This morning a story broke reporting that Sir Alex Ferguson, the legendary former boss of the Manchester United soccer team, was quickly becoming a favorite to be the next coach of Ireland’s national squad. It’s certainly possible that some gamblers got a tip and poured a ton of money onto Ferguson’s ticket. But there’s another, more sinister possibility as well.
The Irish Independent’s piece contains the following quote from Leon Blanche, of Boylesports: “We laid some large bets on Sir Alex Ferguson at 66/1 on Friday morning and the cut him into 33/1. The support continued to come and we were forced to cut him again, into 20/1.” Essentially, Blanche is saying that as more people bet on Ferguson, his company had to shorten the odds. But nowhere does he saw just how much money prompted the change.
In probabilistic terms, the change in odds represents a shift from a chance of about 1.5 percent to about 4.8 percent that Ferguson will get the job. He’s still a longshot. Just think, though, of the effect of a few newspaper articles on the betting action. Ferguson may be the most famous soccer coach in the world, and shortening his odds was bound to grab the media’s attention. Right now, more money is probably coming in for all the possible tickets.
The bookies can change their odds whenever they want, completely at their own discretion. So did they lower Ferguson’s odds because they could no longer take so many bets at 66/1, or did they do it for the exposure? Since we don’t know how much money was being placed on Ferguson, we can’t tell. Either way, the move probably cost them little and gained them a bigger expected payoff.
Image courtesy of Shutterstock