Monday, April 12, 2004

Degenerate Gambler Update: In my last Vegas article I mentioned that I didn't understand betting on baseball because it isn't done via a point spread like football and basketball. In the midst of one cold sweat or another last weekend I managed to figure it out, I think, so here's the deal.

Betting lines are quoted something like this:

Yankees -120
Tigers +110

What that means is for a $1.20 bet on the Yankees you will win $1.00 if the Yankees win. It also means that for a $1.00 bet on the Tigers, you will win $1.10 if the Tigers win. Confusing, no?

Here's one way to think about it. Remember everything is relative to a dollar. Also remember the favorite gets a "-" and the underdog gets a "+". Lastly remember that to win a dollar on the favorite you have to bet more than a dollar. However, you only have to bet a dollar on the underdog to win more than a dollar. That may or may not have provided a systematic way of understanding it. Examples might help:

I bet $1.20 on the Yankees. Since they are the favorite (minus), if they win I get my $1.20 back + $1.00. I bet a dollar on the Tigers. Since they are the underdog (plus), if they win I get my $1.00 back + $1.10.

Now I suspect the way casinos make money on this is by adjusting the line so as to keep the same amount of money on both sides of the bet (just like football or basketball). With one bet one each side, the formulations for the casino would be as follows:

$1.20 bet on the Yankees + $1.00 bet on the Tigers brings in $2.20. If the Yankees win they have to pay out $2.20 to the winner (return the 1.20 bet plus 1.00 winnings) so they break even. If the Tigers win they pay out $2.10 (return the $1.00 bet + $1.10 winnings) for a gain of a dime. Put another way, with an equal amount of money on each side the average wager is $1.10 (($1.20 + $1.00)/2) and the average return is .05 (($1.00 +1.10)/2).

In fact, with well balanced wagers, the house's expected gain is always one half of the difference between the two quoted number -- in our example (120-110)/2 = 5. It stands to reason then, that if a casino wanted to increase their take, they would just increase the differential between the two. If they went to a Yankees -125, Tigers +105, their take doubles, provided they can keep the wagers balanced. In fact many casinos do just that, because baseball is not a common bet, they crank their take up as high as they can. They have a product such they can simply crank up the cost without much worry about losing business.

Of course, if they could make it simpler to get a grip on, baseball would probably be as popular a bet as football, but there are not enough points scored in a game to make a spread meaningful. I find the mechanics of all this fascinating.