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Table of Contents

1. Introduction

.1 Problem statement

.2 Rationale for the study

.3 Research aims and objectives2. Literature review

.1 Introduciton

.2 History of sports betting

.3 How does the betting process look like

.4 The “Cash out” option in sports betting

.5 The main determinants of the betting process

.6 Conclusion3. The theoretical model

.1 The main assumptions of the model

.2 Extreme case analysis

.3 Generalizing the model4. Conclusionof references Chapter 1. Introduction The history of betting has been evolving for centuries and in retrospect, the earliest and most recognizable forms of betting could be traced back to Greece, home of Olympic Games, and Ancient Rome. Early Romans perceived the betting outcome as a decision of a Goddess Fortuna, one of the most popular cults of those years. They considered the concept of sports betting as part of their religious inclinations and spiritual obligations. Pliny the Elder, one of the authorities of the 1st century, said: “We are so much at the mercy of chance that Chance is our god”.increased popularity of gambling was witnessed in the period preceding the Middle Ages, many nations tried to outlaw it, but then, the phenomenon of betting was reinvented in the Renaissance period. Since that time gambling was developing and becoming more popular. Thus, starting with wagering on “how much time one needs to pass a given distance” people ended up focusing on professional sports betting (such as football, golf, tennis, etc.).leaded to the creation of several bodies which were meant to organize betting process among various sporting activities. The advances that have been made in the information and communication technology have largely shaped the techniques of undertaking wagering: several innovations that have been developed improved the effectiveness and the fun involved in the sport betting and made the process easier for the bettors. For example, nowadays it is very popular to use online services (betting sites, sportsbooks). One of the latest trends in sports betting is the “Cash out” option, the tool that gives to bettors the ability to take a return before the end of the event, thus, allowing to secure their profits or minimize their losses.

.1 Problem statement

sports betting bookmaker

Despite the advances that have been made in the sports betting industry, little emphasis has been placed on the analysis of the use and effectiveness of the “Cash out" option. Bettors continue to utilize it without necessarily considering the advantages, disadvantages and viability of that option in the betting process. The question that arises is what makes the bettors use the “Cash out”? While the apparent benefits of this option is that this could spell a boon for a player who has had a bad day in the event, it curbs natural gambling instinct to go for the big ‘kill’ and earn large, handsome bounties for their gambling efforts. According to what rationality implies, if one accepts the bet he will not cash out until the final whistle of the referee unless any certain factors affect this decision. Moreover, the return from the bet taken before the end of the event would be quite less than the face value of the bet. Thus, using “Cash Out” robs the player of watching the nail biting, thrilling finish of the event and leaves him with mediocre sum which could have indeed been very large and substantial had he waited for the game to finally end(McGowan & Mahon, 2013). The above analysis implies that there are mixed benefits and disadvantages associated with the use of the “Cash out” option in betting, and there is dire need to undertake a research in order to understand why do the bettors utilize that option, what does affect their decision and what amount of cash has to be proposed to them in order to make them accept the offer. Intuitively, such behavior can be explained by the bettors’ and bookmakers’ preferences over risk. More precisely, the risk aversion of a bettor can lead to the acceptance of the “cash out” offer proposed by a risk-neutral bookmaker at some point in time during the game. What is analyzed in this paper is whether the risk-aversion of a bettor is the factor that makes him accept an amount of money proposed by a risk-neutral bookmaker before the end and not wait until the end of the event.

.2 Rationale for the study

is of vital importance to rationalize such proposition before undertaking the study and conducting a theoretical model. If the hypothesis suggested would have an irrelevant logical foundation the model would be preposterous and would not give any pertinent results.will be made several assumptions in the corresponding chapter which the theoretical model will be based on. The main idea of making the suggestion that risk-aversion matters is the following. Starting with different beliefs about the outcome of the event, a bettor and a bookmaker change their opinions in the same way. The closer the end of the event, the closer to each other are the beliefs of these two players. Saying that a bettor is risk-averse while a bookmaker is risk-neutral implies that the expected utilities based on their subjective beliefs become closer even more. This allows to make a proposition that there is a point in time when the subjective beliefs of a bookmaker and a bettor are so close to each other that a bookmaker can offer a certain amount to cash out which will be beneficial for a bettor according to his utility expectations of an event outcome.

.3 Research aims and objectives

The following research objectives were developed in order to guide in the undertaking of the study:do betting companies undertake the betting processes and what differences are depicted in the diversified betting processes and options?are the constructs of the “cash out” option in the betting


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