Freakonomics and Sports Betting

I don't bet on sports, but I found this story about how Vegas sets point spreads interesting. The authors of Freakonomics (check out their blog) show that bookies do not just try to get half the bets for the favorite and half for the underdog, as you might expect. Losers have to pay 10% on top of their wager, so that would net the bookie 5% of the total wagers. However, the bookie knows that people tend to like the favorite a little more than they should and are biased toward certain teams (recently the Bears and the Bengals have been favored by more fans over equally good teams like Seattle and Carolina) and sets the spread accordingly, tempting them into bad bets. I also learned that if you bet home underdogs in the NFL you will, on average, beat the bookies. Anyway, check out the article if you like the Freakonomics stuff.