Comments on: Has BetFair a little part of responsibility in the collapse of the Kieren Fallon trial (which cost British taxpayers £950,000)?

By: Medemi

Medemi — Sat, 31 May 2008 20:13:16 +0000

ehhhhhhhhhhhhhhhhh, No.
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(sorry, a simple “No” was too short a message)

By: Ed Murray

Ed Murray — Fri, 23 May 2008 11:43:38 +0000

INSANE IDEA ALERT
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We could put in place a system where any user who bets on a prediction market that is subsequently investigated by police becomes liable proportionately for the costs of that investigation :-D. The cost of policing should stem from the original users of the market (although there is an accrued benefit to future users if there have been previous convictions, acting as a deterrent to the miscreants, so maybe future users could contribute to, even on clean markets). The proportion of the cost of policing borne by users should be dependent upon their relatived elasticity of demand for the market (in comparison to the prediction market provider/supplier), with the higher their relative elasticity, the greater the percentage of the cost paid for by prediction market customers, rather than the prediction market provider. :-). (A joint sharing of costs according to relative elasticities of demand creates the smallest deadweight loss).
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Overall though, £950,000 bills for the taxpayer are a pretty bad thing to start with, but are much more damaging when it is a negative externality not incorporated into the original supply/demand function of the prediction markets in question. If you want to use racing prediction markets, it is to your benefit if they are clean, and prediction market users should have to pay for the privilege of keeping it clean, if their demand for wagers on that prediction market isn’t perfectly inelastic (which it isn’t).

By: Ed Murray

Ed Murray — Fri, 23 May 2008 11:26:27 +0000

I make absolutely no comment on where any ‘blame’ does or doesn’t lie, but I do think that the cost of policing prediction markets should be borne jointly by the provider and the users of the prediction markets in question.
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The taxpayer did not ask for the original prediction market to be run, and has picked up a £950,000 bill. This could be completely the police’s fault, or completely Betfair’s, or completely someone else’s, I make no comment, and to be fair, it could be completely the police’s fault that the prosecution collapsed (and it could perhaps not be completely the police’s fault).
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However, active policing should be incorporated into the pricing mechanism of the prediction market, and should not be allowed to become a negative externality unpaid for by either the participants or the supplier of the market. People who bet on these markets should have to pay more to use these markets, if there is a bill to be paid for policing them. Likewise, the provider of these markets should charge a higher price for providing this service, so that any costs (in this case £950,000) are paid for from the original market.
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In this case, racing prediction markets are flawed if the cost of policing them falls on to the taxpayer. When negative externalities are not incorporated into the pricing system, you get an overprovision of markets, and the £950,000 spent by the taxpayer (presumably mostly on legal fees to lawyers) could really have gone on something better for society.
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Most traditional bookmakers flag up suspicious activity on accounts very quickly, and don’t let people smash in in size repeatedly, because it is the bookmakers own money which is at risk. As a former bookmaking trader, I believe that incorporating those kind of decisions across the variety of exchanges prediction markets, would be beneficial to the UK taxpayer, and to the exchanges themselves. Would be great to see it introduced one day, if it happens that I am right (which I may be, or may not be ).

By: The BetFair–Fallon debacle cost British taxpayers £950,000. | Midas Oracle .ORG

Thu, 22 May 2008 15:30:46 +0000

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