How to apply economics to sports betting

Sports betting has been popular for a long time now, but online sports betting has made this gambling activity even bigger. At any given time, you will find countless punters from all over the world who are constantly placing sports bets on their favorite sports.

Experienced bettors are using their sports knowledge to predict the outcome of each sporting event before placing a bet. But, some of them are using their economics knowledge to gain an advantage and be more effective in sports betting.

In this article, we are going to reveal how you can use sports betting economics and be more effective with your betting.

The Efficient Market Hypothesis and the Value of Probabilities

We’ll start by talking about the efficient market hypothesis (EMH), which has been a basic belief in the world of economics for decades.

She claims that every economic market, including the sports betting market, always strives for an equilibrium where all prices are correct, meaning they are not under or overvalued.

As mentioned above, the concept of EMH also applies to the sports betting market, where it also presents markets and prices in the form of quotes. Let’s assume that the hypothesis is correct and that the quotes represent the true value.

This would mean that making steady, long-term profits would simply be impossible. Not that making profits, in the long run, is completely impossible, but those profits would be subject more to luck than to skill.

Pricing each outcome in sports betting is a very difficult and extremely complicated process. Even if bookmakers knew the exact odds, the odds of a given event occurring would be very different from the market.

If the sports books didn’t do this, they would simply put themselves at a disadvantage and offer an arbitration option. But in reality, offsetting prices by the probability of an outcome is really guessing what others think is the correct price and trying to get as close to it as possible.

Conventional wisdom implies that prices should be closer to the true estimate if there are more traders in the market. Furthermore, more traders can also mean more noise in the market.

In the world of sports betting, the true value of odds for a given outcome depends on the outcome itself. Those who don’t believe that the probabilities are true can do a simple analysis, taking all past probabilities on events to see if they occurred in half the time.

Applying economics to betting

In sports betting, bettors must be careful when considering sunk costs. For example, let’s say a punter places a bet on Manchester City to win the Premier League in October.

This action should not limit them to placing one more bet on another team that won the championship in February as a result of the information recently collected. The market is constantly changing based on transfers, injuries, manager replacements, as well as in-game decisions that can change things.

Because of this, you should not hesitate to place another bet on other teams while your outright bet is still in play. It’s a very smart move to place another straight bet while also gathering enough data to back up your new bet.

Therefore, placing a bet today for the Premier League winner does not necessarily mean that the odds will remain the same.

The real danger in sports betting is making countless additional bets just to win back your money. Placing sports bets just because the odds are providing good value is not a smart strategy.

Unfortunately, there are many bettors who are easily becoming biased by the incredible value of the odds. Some may also place bets based on emotions and personal preferences, which is also not a smart thing to do if you want to be effective at sports betting.

Sports betting is strictly about the pursuit of value and risk assessment, which cannot be done just by looking at the betting odds that appear on the main page of bookmakers.

On the whole, the idea of ​​every bettor in the market making bets with the same behavior in a totally rational way is not correct. There are many bettors who are placing sports bets using their emotions or without the help of analytics, which automatically adjusts the market to provide false value odds.


Sports betting can provide bettors with some very big rewards if they know how to place bets more efficiently. This means that they will have to possess additional knowledge in addition to understanding sports.

Understanding the basic economics that apply to the sports betting market can dramatically improve punters’ understanding of sports betting, which can lead to greater profits.

Any bettor who is placing bets based on emotions and avoiding the help provided by analysis will not only harm himself, but also adjust the sports betting market to present wrong values ​​on odds.

That said, it is crucial to avoid betting on emotions or just looking at the good odds, as this can often result in you losing your precious money.

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