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Type	Working Paper
Scope	Discipline-based scholarship
Title	The Liquidity Advantage of Quote-Driven Markets: Evidence from the Betting Industry
Organization Unit	Strategic Management and Business Policy (Egon Franck)
Authors	Raphael Flepp Stephan Nüesch Egon Franck
Language	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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