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Sports Betting: Everything You Need to Know About a Dutch Book or Subjective Probability Theory

Are you new to sports betting? Or, are you an experienced pundit? What do you understand by the concept of subject probabilities in terms of betting odds and how sportsbooks derive the betting odds?

The Dutch book: Disregarding the subjective probability theorem

Wikipedia.com defines a Dutch book as a "set of odds and bets which guarantees a profit, regardless of the outcome of the gamble." In other words, the "probabilities implied by the odds [are] not coherent, namely, [they] are skewed."

At this juncture, it is essential to note, that while it is important to understand the subjective probability theorem, it is often just a thought experiment. Because the principle behind a subjective probability cannot be measured using a concrete algorithm, there is very little quantitative evidence that it exists.

Finally, this theory proves that betting odds and their associated probabilities must be substantive and quantitative; otherwise, there is no merit in offering betting odds on a professional basis. The sports betting agency will lose both clients and money. Because this scenario is not, and will never be a working business model, the sports betting agency will ultimately cease to exist.

Using quantitative data to prove the merits of a bet

Using quantitative data to calculate implied probabilities is directly juxtaposed to the qualitative nature of subjective probabilities. Therefore, let’s consider how a sportsbook uses probabilities to calculate bonuses, linked to the Betway bonus code, such as the Odds Boost.

What is the Odds Boost?

Succinctly stated, it is a bonus option that sportsbooks use to reward existing clients for regular wagering behaviour. It is often offered as a daily bonus and changes the betting odds to benefit the bettor.

Let’s consider a simple scenario to describe this concept:

When the sportsbook first determines the betting odds, it looks at the real probability of a specific outcome occurring. And then it adds the bookmaker’s margin or profit percentage to the betting odds.

The sportsbook is in business to make money. And, the way it makes money is to add a percentage to the probability calculation. The fair probability calculation adds up to 100%.

The implied probabilities that include the bookmaker’s edge will always add up to more than 100%.

In summary, an example of a fair book shows the three actual outcomes of a football match between two teams:

Home win: 1-1 (50% probability of the event occurring)

Draw: 2-1 (33.34% probability of the event occurring)

Away win: 5-1 (16.66% probability of the event occurring)

The three percentages (50% + 33.34% + 16.66%) add up to 100%.

The next step is to add the bookmaker’s margin. How this is calculated is not relevant to this argument. The final numbers are important because they show the Odds Boost bonus calculation. Therefore, the figures with the bookmaker’s margin added are:

Home win: 4-6 (60% probability of the event occurring)

Draw: 6-4 (40% probability of the event occurring)

Away win: 4-1 (20% probability of the event occurring)

These three percentages now add up to 120%. And, the bookmaker would publish these odds. However, in the event of the Odds Boost, the sportsbook would remove its margin and revert to the fair book where the probability percentages add up to 100%.

As described above, the fundamental reason for offering the Odds Boost is to encourage more clients to place bets. The loss of the overround on these bets is counterbalanced by the additional bets.

The value of qualitative data

Qualitative data is defined as unstructured and non-numerical data. While, as described above, there is very little merit in basing the betting odds on non-numerical data or subjective probabilities, there is no doubt that qualitative data can have an impact on the outcome of a match.

The best example of this is the home ground advantage. There is no mathematical reason why playing at a particular team's home ground should play a major role in determining the outcome of a match, but it does.

The home ground advantage as defined as the "benefit that the home team is said to gain over the visiting team."

As described above, this advantage is psychological in that teams seem to play to a higher standard when their fans are cheering them on. Juxtapositionally, teams playing away seem to suffer from the rigors of travel, no matter how short the distance, a hostile crowd, changing time zones and climates. It cannot be emphasised enough that this advantage or disadvantage is fundamentally psychological, but it is real.

It is even taken into account when determining the fair betting odds book as described above. In this case, the qualitative data has had a major impact on the quantitative numbers that show that any team playing at its home ground has an advantage.

Let’s look at the history of the rivalry between two English Premier League football teams, Manchester United and Manchester City, with special reference to Manchester United’s win-lose ratio.

The rivalry between these two teams began in 1881 when St Marks played Newton Heath. Their names were later changed to City and United, respectively. Manchester City’s home ground is at the City of Manchester Stadium, while United’s home ground is Old Trafford.

Statistics show that United played City a total of 162 times, played 81 at home, won 34 at home, drew 26 at home, and lost 21 at home. United also played City 81 times away, won 30, drew 25 away, and lost 26 away. In summary, United beat City 39.51% of the time. Finally, the pertinent statistic here is that United won against City 34 times at home. They also drew 26 times and only lost 21 matches at home.

It's important to note that these two teams are both strong rivals, so the difference in the win-lose statistics will be less than they would be between a very strong team and a weak team. Even though the win-lose difference is small, it still shows the home ground advantage.