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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title The Liquidity Advantage of Quote-Driven Markets: Evidence from the Betting Industry
Organization Unit
  • Raphael Flepp
  • Stephan Nüesch
  • Egon Franck
  • English
Institution University of Zurich
Series Name UZH Business Working Paper Series
Number 342
ISSN 2296-0422
Number of Pages 26
Date 2013
Abstract Text This paper investigates the puzzling coexistence of the quote-driven market structure characterized by traditional bookmakers and the order-driven market structure characterized by betting exchanges in the betting industry. Even though betting exchanges are considered as the superior business model due to less operational risk and lower information costs, bookmakers continue to be successful. We show that liquidity, which is only guaranteed at the bookmaker market, significantly improves the bookmakers' price competitiveness. Using matched panel data of both bookmaker and betting exchange odds for 17,682 soccer matches played worldwide, we find that a major bookmaker offers more favorable odds than a major betting exchange in the early pre-play betting period and less favorable odds shortly before match start.
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