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Price Setting in the NBA Gambling Market: Tests of the Levitt Model of Sportsbook Behavior

Author

Listed:
  • Rodney J. Paul

    (St. Bonaventure University)

  • Andrew P. Weinbach

    (Coastal Carolina University)

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.

Suggested Citation

  • Rodney J. Paul & Andrew P. Weinbach, 2008. "Price Setting in the NBA Gambling Market: Tests of the Levitt Model of Sportsbook Behavior," International Journal of Sport Finance, Fitness Information Technology, vol. 3(3), pages 137-145, August.
    • Handle: RePEc:jsf:intjsf:v:3:y:2008:i:3:p:137-145
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    More about this item

    Keywords

    efficient markets; gambling; sportsbook;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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