The Effects of Risk Aversion on Wagering: Point Spread versus Odds

Abstract

Currently, casinos and bookies use the point-spread method for betting on football games. Since an odds system is used in various other sports, what factors explain the current structure of the betting market? As the bookie's profits are a percentage of the total money wagered, the existence of point-spread betting indicates that the total money wagered under this betting scheme is greater than that generated by odds betting. This paper suggets that the current market structure is a consequence of risk-averse attitudes of bettors.