Abstract
Abstract This chapter offers an introduction to person-to-person betting exchanges, a relatively new market format in sports betting. There is currently a debate concerning the integrity of exchanges, which has elicited a variety of policy responses in different countries, ranging from regulation to outright prohibition. To enable the debate to be conducted on a more informed basis, there is a role for economists in the measurement of the economic costs and benefits of this new type of betting. The chapter is primarily concerned with the information efficiency of exchanges. Their operation and functionality are discussed, along with some of the initial impacts they have had on betting markets, including the hostile response from some traditional bookmakers. Previous empirical studies concerning information efficiency in exchanges are outlined, although they are few at this relatively early stage of the development of the exchanges. New evidence about the degree of odds bias in exchange horse race markets is then presented. This evidence is found to be consistent with previous studies showing a much smaller degree of favorite-longshot bias in the exchanges than exists in traditional bookmaker markets.
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