Tuesday, December 29, 2015

Takeout Moves, On Selected Bets & Game Theory

There was a little news this week about takeout, and most of it is welcomed for casual horseplayers.

Hawthorne (which has a mandatory pick 5 payout tomorrow) has lowered pick 4 juice to 15% from 25%. 

This 15% has also been applied to the pick 4 for the new harness meet, which starts this spring.

Also, the Meadows has dropped trifecta takeout to 20% from 27%, making that pool a little more playable for casual players. 

Both of these moves are not earth shattering by any means, but do show some good will towards customers. As well, the Pick 4 for harness at Hawthorne was needed. Players have embraced the Balmoral Park pick 4, making it a staple and seeing 400-500% handle increases, on average, since the takeout had been reduced on its pool from 25% to 15% back in late 2009. Hiking it ten points, while unsuspecting customers think they're still paying 15%, is not good business from an ethical standpoint.

Overall, these small changes in one pool do not mean much for a couple of reasons. One, rebated action will see little difference in takeouts and they are the most price sensitive, and two, beggar thy neighbor in the sport.

Both of those items are the more maddening in trying to price the sport optimally, allowing it to grow.

A pick 4 reduction from 25% to 15% for a track that charges a 4% signal fee, with 90% of handle off track, lets the bet taker take the hit. Why we don't see more tracks who charge 4% or 5% signal fees lower takeout is one of this sports' great mysteries. With 5% margin regardless the retail price, it doesn't cost the Meadows a dime to lower takeout, even if handle stays exactly the same. In the end, with rebated customers not having a price change, handle bumps tend to be harder to come by with one-pool reductions.

The incentive for tracks still lies -  through beggar thy neighbor  - to offer higher takeout bets. The Meadows may lower juice from 27% to 20%, increasing payouts to customers, but in the open market, the money rebet could go into a 25% pick 5 at Woodbine, so they get the benefit. This is why branded bets, like the 15% takeout pick 5, incentivizes 'cheating' like we saw earlier this year with Woodbine. Charging 25% for a bet everyone thinks is 15%, is shady, but lucrative.

In the end we have a prisoner's dilemma. All tracks - and the industry - will be worse off if the savings from track A's takeout reduction are scooped up by track B through Z.  But they do it anyway. 

All of the above is completely moot if the Meadows and Hawthorne are "your tracks". If you play those, and no others, you will be going home with more money each day, unless you're shut out. And that is a good thing, because a couple of points at the end of the year can be the difference between being a winner and a loser.

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