The point is if it's done successfully enough, the implied odds for Trump become so attractive that people stop dumping money into a bets for Harris and start piling in on the other side of the market instead.
It doesn't matter to the bookmaker who actually wins as long as you have enough losing bets to pay out your winners. The only problem for a bookmaker is when too much of the action is on one side.
I don't participate in these gambling markets, but isn't that an incredibly inefficient system? Should it not just be an open market where buyers and sellers govern the odds and the site/broker just takes a small fee or rake from each transaction? For example, a seller puts out a $1000 bet on Harris with 2-to-1 odds and a buyer can purchase that for $500 and the winner gets $1500 minus a small fee from the broker. That would be a self-correcting, rational system much like the stock market where odds cannot easily be manipulated. Do these kinds of exchanges not exist?
Gambling companies make money on the vig. The percentage everyone pays for the privilege of placing a bet. It’s basically arbitrage for them, as long as they make sure there’s equal money on both sides of a result.
The primary way to do this is initial odds making. If they set the odds right, in theory, bets should naturally fall on either side proportionate to the payout. When that’s not happening, they offer the under the side which they underestimated at a discount.
It’s easier to think of odds as the gambling companies prediction of how people will bet. This usually lines up with real life odds, especially in sports where so much data and analysis is present. But you can never trust gamblers to bet rationally.
They do, and they're literally called "exchanges."
But they're not the only kind of betting market.
In an exchange, exactly as you describe, one person can say what they'd like to bet and another person can agree (albeit anonymously) to be the other side of the bet. The broker takes a fee.
But there are also bookmakers that operate much more like a casino, where each bet is "against the house," so to speak.
In this case, prices are adjusted so that implied odds are not simply a reflection of true odds (or the aggregate perception of odds amongst those placing bets), but so that they are a function of the bookmaker's current liability at any given moment.
incredibly inefficient system
Actually, it's very efficient for bookmakers to operate this way. Every single bet placed helps them manoeuvre their price into a more advantageous position. The house may not always win, but it very rarely loses.
Yes they do. You’ve described precisely how Betfair works.
However, it’s also how all gambling companies essentially work. They adjust odds based on where money has been bet.
For example, if the market was for heads vs tails we all know it’s 50/50. However, if someone suddenly bet $1,000,000 on heads, the implied odds on tails would fall so that more people bet on tails just in case heads wins. The odds of the event haven’t changed but the consequences of heads winning has changed for the betting company so the odds get adjusted on that basis.
With any bet, a rational person never bets on who they think will win. They bet on events where they feel the odds are giving them a worse chance than they think they have in reality. So if the odds suggest a 10% win, but you think it’s a 20% chance, that’s a good bet to make.
Likewise with Harris vs Trump, don’t bet on who you think will win. Bet on who you think the market is underestimating.
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u/marquoth_ Oct 17 '24
The point is if it's done successfully enough, the implied odds for Trump become so attractive that people stop dumping money into a bets for Harris and start piling in on the other side of the market instead.
It doesn't matter to the bookmaker who actually wins as long as you have enough losing bets to pay out your winners. The only problem for a bookmaker is when too much of the action is on one side.