One way to stop match-fixing in sport is to make betting legal. But legalisation in itself does not eliminate the incentive or ability to fix a match: players must be educated; and there has to be coordination among betting regulators, sports governing bodies and law enforcement, sometimes beyond national boundaries.
These are among the conclusions of research on corrupt bookmaking by Parimal Kanti Bag and Bibhas Saha, published in the May 2017 issue of the Economic Journal.
Why do we often see headlines of match-fixing in many popular sports? Global marketing of sports has no doubt helped the betting market expand both in the West and the underground markets of Asia. But it has also attracted unscrupulous bettors, and even turned many bookmakers and players into occasional cheats.
The new study shows that sports betting is inherently vulnerable to corruption for the way a corrupt bookmaker can manipulate betting odds to entice most bettors to bet on the favourite team after secretly bribing the team to lose. If most bettors agree on which team is the favourite to win and if they are unaware of any foul play, the bookmaker''s ploy will work very well, defying the standard vigilance of the anti-corruption agencies.
In countries where betting is illegal, this problem is likely to be many times bigger, simply for the fact that much of the information remains hidden from the public arena, and the bookmakers are able to exercise sufficient control over fixing and odds setting.
What if bettors are mindful of match-fixing: shouldn''t they stay away from betting? The answer is NO. As long as they suspect but cannot be sure of match-fixing, the bookmaker can still take advantage of bettors'' heterogeneous beliefs about which team is truly favourite. After bribing the team that the bookmaker thinks is the favourite, the bookmaker can set the betting odds in a way such that the majority of bettors would arrive at different conclusions based on their own perceptions of the favourite.
Some bettors would incorrectly guess that the match has not been fixed and that the bookmaker has a different perception of the favourite. Others would correctly guess that the match has been fixed and the team they thought stronger is even more favourite. They would bet in opposite directions – on their respective favourites – to make the betting look like business-as-usual, except that the favourite and the long-shot would have secretly swapped places to the benefit of the colluding players and the bookmaker.
How to stop the menace of match-fixing? One lesson that many countries can learn is that legalisation of betting is a good start. But legalisation in itself does not eliminate the incentive or ability to fix a match. As the researchers show in related work, in a legal environment the bookmaker can be kept clean through audits, inspections and regulations; but anonymous fixers may try to exert the same evil influence.
The research shows that even then instead of making fixing unprofitable, the bookmakers may offer encouragement for fixing by carefully setting the betting odds. In other words, sports betting has a perverse incentive problem that can invade the associated sport itself.
Therefore, the right kind of regulation is the issue. In the UK, a general premise of betting regulation is that the threat to betting comes mainly from external sources (rogue bettors), which can be picked up by the watchful eyes of the betting houses, as if there is no threat from within. The same premise may not be justified for the untamed emerging markets of Asia and Africa.
These researchers'' body of work suggests that any intervention that aims to get results must be multi-pronged. In addition to educating players, there has to be coordination among multiple agencies, such as the betting regulatory and sports governing bodies and law enforcement, sometimes beyond national boundaries.
''Corrupt Bookmaking in a Fixed Odds Illegal Betting Market'' by Parimal Kanti Bag and Bibhas Saha is published in the May 2017 issue of the Economic Journal. Parimal Kanti Bag is at the National University of Singapore. Bibhas Saha is at Durham University Business School.