How do bookmakers establish odds if sports events are unpredictable, considering the multitude of factors at play that prevent precise probability estimation?
In: Mathematics
They don’t need to know the exact probabilities. They need to make money and for that to happen they need to make sure that the total wagered is more than the total payouts.
They don’t need to know who will win. What they need is to estimate how much money people will bet on an outcome depending on the odds offered. People’s tendencies are much much easier to predict than sports outcomes.
On top of that, odds are not set in stone. If a bookmaker offers 50/50 odds but 90% of the money is being put on one outcome, they start adjusting the odds so that the payouts are the same regardless of the winning outcome.
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