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 gather all the information they can and do their best using proprietary models. Just by looking at team performance historically they can get in the ballpark (e.g. even without looking at any data you can be very confident the LA Dodgers will have a win rate between 50% and 70%), then looking more specifically at player performance, where the team is playing, how they historically do versus this specific opponent, etc help them hone it in.
But bookmakers **aren’t really in the business of figuring out “correct” odds**, they are in the business of enticing players to bet while maximizing their return. Better odds gets more people to bet but reduces their payout; worse odds means they’re financially safer but will attract fewer bets. So bookmakers are trying to set odds which match gamblers’ appetite for betting, not odds which match a team’s chances of winning. If there is some irrational reason why people may *believe* a team will win/lose (e.g. “they’re cursed” or “they’re due for a loss” in the Gambler’s Fallacy sense), the odds will reflect that fact.
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