This Is What I Call Being Risk-Averse

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I found myself in a Las Vegas sports book with good friend and economist John List the other day.  Since we both live in Chicago and have kids who play baseball, we thought it would be fun to bet some money on the Chicago White Sox.  It would give us a reason to root for the White Sox, and give our kids a reason to open up the morning paper to see if the team had won.


We have no special information about the White Sox, no inside information.  It was purely for consumption value.

If the sports book would give us a fair bet, i.e. the equivalent of a 50-50 coin toss, we would be willing to bet a lot because we aren’t very risk averse.  I’d say we would have been willing to bet at least $10,000, probably even more.

But, of course, the sports book doesn’t offer fair bets.  On the particular bet we were looking at — how many games the White Sox would win over the course of the regular season – the sports book charges about an 8 percent vigorish or commission.  We decided that at that price, we were willing to bet $2,500.  Eight percent of $2,500 is $200, so essentially we were willing to pay the sports book $200 in expectation to let us place this bet.

So we strolled up to the betting window and said we wanted $2,500 on the White Sox to win more than 84.5 games this year.

The lady behind the counter said the biggest bet we could make was $300.


We asked her why, and she called over a manager who told us the reason: The casino “didn’t want to take too much risk on this kind of bet.”

This casino is part of Caesars Entertainment, the largest casino company in the world, with annual revenues approaching $10 billion.  And they aren’t willing to let us pay them $200 to flip a coin for $2,500?

The next thing you know, the casino will tell me I can’t lay $2,500 on “Black” at the roulette table.  After all, it is essentially the same gamble as our White Sox bet … a coin toss in which the casino gets better than fair odds.

This seems like a crazy way to run a business.  It is especially surprising because Caesars is one of the few big businesses run by an economist, Gary Loveman, who has brought good economic thinking to many other aspects of the company’s operations.

If I weren’t an economist, running a sports book would be a pretty good job. I wonder if Caesars is accepting resumes?

(For more on sports betting at Caesars and in general, see this column we wrote for The New York Times a few years back.)

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  1. VB in NV says:

    Get 8 friends to make $300 bets.

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  2. Puneet VOhra says:

    This is their way of eliminating fraud. i.e. they don’t want to caught in a situation where you can bet $100K and then bribe a player in the White Sox or other team to deliberately lose, causing a huge loss to the casino.
    This is a version of Moral Hazard in economics parlance.
    Can I send my CV to you?

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  3. Darkpool says:

    They saw you coming, and you’re in the Griffin Book…

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  4. john_d says:

    Roulette wheels are random; baseball outcomes are not. The risk that Ozzy Guillen could bet a large amount on the Sox winning less than 84.5 games and making it so is not a risk the casino is concerned about with roulette wheels.

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  5. Chad says:

    I am sure that the “risk” they are talking about is that they don’t want to lose too much money to people who may have “insider information”. This is not a possible risk while playing roulette.

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  6. Ryan says:

    Low limits, I assume, helps ensure that the casino gets equal betting on both sides of the line. A large bet would most likely require them to reassess the over/under for the White Sox to induce more players to take the opposite proposition (i.e. under) and hedge their own losses. A quick test of this theory would be to compare betting limits to the number of participants for a given line. Assuming that gamblers were splitting 50/50 for an individual bet, I would predict that larger max limits would correlate with a larger pool of participants.

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  7. Richard B. says:

    Caesar’s has much more information on the odds of winning at the roulette table, or at a coin toss, than they do about the White Sox this year. I suspect they are in the sports betting business to support their entertainment business. Taking a risk on a few hundred bucks for the sake of making some customers happy is probably good hospitality business. Taking a position on thousands of dollars on a business over which they have little information and no control is not their business.

    Maybe you can find a Cubs fan willing to take the other side of that bet.

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  8. Psychohistorian says:

    It seems much more likely you could have inside information on sports teams than you could on the roulette table. In fact, the house knows with great precision what the true odds are on the roulette table. If you are a particularly sophisticated gambler, you might be able to shop around for the right odds on a sporting event and hope to make money, especially if the betting market is not sufficiently competitive.

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