State Monopoly x Private Gambling Market

State Monopoly x Private Gambling Market

Who bets on sports? – everyone, but mostly, young men with higher income. This description sounds very similar to the one about sports fans. Indeed, these two activities seem to go hand-in-hand. Another interesting phenomenon is private vs state-monopolized markets for sports betting. While state-monopolized markets in Spain and Canada seemed to attract more educated participants, the private market in the UK tend to attract players without a college degree. Could there be a correlation between improved odds and return-to-player that the competition in the private market generates?

Authors of this review:

Nikita Goncharenko

Date of Publication:

09/10/2022

Academic Reference:

Humphreys, B. and Perez, L. (2012). Who Bets on Sports? Characteristics of Sports Bettors and the Consequences of Expanding Sports Betting Opportunities. Estudios de Economía Aplicada. 30. 579-598.

Tags:sports gamblingdata analytics

Key Ideas

Sports bettors tend to be males, employed, not single with relatively high incomes.

This article compares 3 markets for sports gambling: Canada, Spain, and the UK. The article used the "public choice model", which is characterized by governments creating policies based on lobbying by interest groups.

British bettors appeared to be less educated. While both Canadian and Spanish bettors tended to have more education.

There is a general congruence between sports bettors and sports spectators, as activities might complement each other.

Sports organizations admit the corrupting influence of sports betting on athletes. The incentives for corruption on different levels can be seen as a general side effect of sports gambling.

Governments acknowledge problems and yet utilize sports gambling for revenue generation in the form of regulations and taxation.

European Union countries have decreased the number of governmental monopolies in sports gambling, promoting competition among private operators. [NG: question to discover: Why?]

In Spain and Canada, sports betting games were still offered by governmental monopolies by the time the article was published. However, both countries opened the market for private betting providers in 2011 and 2021, respectively.

In Spain, players unite in syndicates to combine knowledge and funds for sports betting.

Overround is the opposite concept of return-to-player (RTP). The concept means how much money players lose to sports betting providers. Monopolies tend to have higher overround (160% to 300%), while private operators tend to decrease the overround up to 110% due to the competition for better odds, which attracts new customers.

Spanish famous betting market is La Quiniela, which has a takeout rate of 45%.

Governments' monopolies in betting bring funding to the state in the form of overrounds and takeover rates, as opposed to taxes in the case of private market operators. These revenues are then distributed to defined state-funded projects and/or organizations. Moreover, as participants of sports betting would usually obtain higher income, betting can be considered as another form of progressive, voluntary tax (no one is obligated to bet on sports).

While sports bettors gain benefits from private sports betting operators (in the form of decreased overrounds and takeout rates), the organizations that depended on funding from sports betting monopolies happen to be at threat of not having funds to operate anymore.

Citations

"The likelihood that an individual bets on sports falls with age. the likelihood that an individual bets on sports increases with income. ... This profile of sports bettors matches the characteristics of those sports fans who watch sports on television (Hammervold and Solberg, 2006) and attend live sporting events (Borland and Macdonald, 2003)."

"In the UK, individuals who did not attend college are more likely to bet on sports."

External References

Borland, J. and Macdonald, Robert. (2003). Demand for sport. Oxford Review of Economic Policy. 19. 478-502.

Hammervold, R. and Solberg, H. (2006). TV Sports Programs—Who is Willing to Pay to Watch?. Journal of Media Economics. 19. 147-162.