Eli5: How do “bookies” actually make money?
In: Economics
The most straight forward is adjusting the odds they offer betters so that over the large number of bets they expect to handle,they’ll make money. It’s called “positive expectancy”.
Let’s say,you’re the bookie and you think Team A only has about a 33% chance to win,so you should offer punters odds of 2/1. However,you offer shorter odds of 1/1 which implies team A should be expected to win 50% of the time. Now,let’s say someone bets $10 with you at 1/1. Assuming you’re assessment of the teams chances are correct, 2 out of every 3 times you’ll be correct and the punter will lose $10. So you win 2 x $10 = $20, and lose one in every three times, so 1 x $10 = $10, leaving you with $20 – $10 = $10 profit.
The whole process is based on the bookie being able to accurately predict the chances of something happening better than the punter.
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