sports and gambling

The most recent issue of Economic Inquiry offers a number of interesting papers. I mention three of them here.

First, there is evidence that the favored team in a college basketball (and other sports) game likely to win but by less than the gambling point spread. This is consistent with point shaving. However, Dan Bernhardt (Illinois) and Steven Heston (Maryland) find similar patterns in favored team performance in games in which there is no incentive to point shave. They argue that "the data are better explained by strategic efforts to maximize the probability of winning." Read the paper.

Second, Michael Davis (Missouri Sci & Tech) and Christian End (Xavier) present evidence that NFL team success has "a significant positive effect on real per capita personal income" in the city in which the team is based. Read the paper.

Finally, David Forest, O. David Gulley, and Robert Simmons use data from one of Britain's largest bookmakers and data on public lotteries to show that lottery play is a substitute for "horse race, soccer and numbers betting." Read the paper.

lottery tickets and lucky stores

Jonathan Guryan (Chicago) and Melissa Kearney (Maryland) point out that stores that sell a large-prize winning lottery tickets experience a significant upturn in lottery sales in the following weeks. They show that this upturn is largest in poorer areas. Why is this? The authors test two explanations. First, having a lottery winner in the local area may help advertise the lottery, which could increase demand for tickets. Second, people may believe in the "lucky-store effect".

They find evidence in support of the lucky-store effect and not in support of the advertising story. Because lottery winners are determined randomly, such a lucky store effect does not exist, and their paper provides evidence of irrational behavior.

The paper was published in the AER. Gambling at Lucky Stores