One of those random questions that pops into my head from time to time:
People bet on all kinds of things. There are state-run horse-racing betting… places. There are informal football betting pools. I understand there are bookies out there that will figure the odds and let you bet on just about anything. But here’s what I don’t get: the impression I get is that in, say, a horse race, you can choose to bet on any horse from the long shot to the sure thing. The payout is higher if you bet on the long shot and win, but there’s still a small payout if you bet on the favorite. Now, how does that work, economically? Doesn’t offering a payout for the most likely outcome almost gaurantee a loss for the bookie? Even if it’s low, the majority of people are still going to bet on the most likely winner, right? To take a simple case, if there’s a 10-to-1 chance that Socky will beat Meathead in a boxing match, where’s the financial advantage in offering odds on Socky? Just as a Meathead victory should result in a payout of ten times any amount that was bet on him, shouldn’t a Socky victory logically result in a payout of one tenth of what was bet – a bet that no one in their right mind would make? What am I missing here?