The Dime Superfecta
My buddy Randy Parker and I started a project a few months back investigating the effect on handle, efficiency, and return from reducing the minimum wager on the superfecta from $1 to 10 cents. Hinsdale Dog Track was the first to offer dime supers in '04 and Sam Houston became the first horse track to do so in '05.
To study the dime super we looked at races from Churchill Downs and NYRA (Aqueduct, Belmont, Saratoga). We have data from CD starting with the Spring '05 meet and ending with the Spring '08 meet. CD introduced the dime super on May 9, 2007, giving us 1,353 dollar super races and 1,047 dime super races. Our NYRA data runs from 1/1/2005 to 10/02/08. The dime super was introduced in New York on September 30, 2007 leaving us with 1,546 dollar super races and 794 dime super races.
Does the reduced minimum effect betting handle?
Superfecta handle fell at both tracks (14% at CD and 4% at NYRA) after the reduction in the minimum from a dollar to a dime, but overall handle fell even more. The contraction in handle at Churchill Downs post 5/9/07 was a result of the standoff between the track and the horsemen that resulted in restricted access the CD pools. The exacta pool at CD fell by 28% and the trifecta pool by 31% from the previous period. NYRA also experienced declines - 15% in the exacta pool and 26% in the trifecta pool. Perhaps this could be attributed to the rough '08 meet at Saratoga which was hampered by bad weather. No matter what the reason, there was a decline in overall wagering from the dollar super period to the dime super period at CD and NYRA.
Did the lower denomination superfecta attract more or less money to betting pools controlling for the overall reduction in handle? Perhaps bettors that did not previously play the superfecta because of its $1 minimum are attracted to the dime version of the wager and increase superfecta handle. On the other hand, current $1 superfecta players may just reduce their overall superfecta betting as a result of the lower minimum and drive superfecta handle down. Looking at the ratio of superfecta to trifecta and superfecta to exacta handle controls for the overall reduction in betting. The ratio of the superfecta to trifecta pool was 35% at both CD and NYRA with dollar supers and increased to 45% at CD and 47% at NYRA with dime supers. The ratio of the superfecta to exacta pool was 28% at CD and 27% at NYRA with dollar supers and 36% at CD and 32% at NYRA with dime supers. These numbers indicate that moving from a dollar to a dime increased superfecta handle.
Did the change have a positive impact on overall handle? There is potential that the dime super could shark, or take money away from, the trifecta pool. The superfecta can be viewed as a substitute for the trifecta and increased accessibility might steer bettors from the $1 trifecta to the dime superfecta. If we assume that the superfecta is unrelated to the exacta then we can compare the change in the super/tri ratio to the super/exacta ratio for evidence of sharking. At Churchill Downs the denomination change appears to only have a slight effect on the trifecta pool. The superfecta did increase 10 percentage points on the trifecta (super/tri ratio) but gained a similar 8 percentage points on the exacta (super/exacta ratio). Furthermore the trifecta to exacta ratio experienced only a slight decrease from 81% to 79%. At NYRA tracks the dime super did take a bite out of the trifecta. The superfecta pool gained 12% on the trifecta and only 5% on the exacta. The trifecta/exacta ratio fell from 76% to 68%.
Does the reduced minimum effect efficiency?
Measuring efficiency involves somehow determining if public accurately assesses the true probability of outcomes. FInding true probabilities (referred to as objective probabilities in the literature) is iffy enough for win wagers. So here is what we are doing (file this under two wrongs make a right) - we are calculating the probability of the superfecta outcome using win probabilities derived from betting in the win pool (called the subjective win probability). From the superfecta probability we get a predicted payoff and compare this to the actual payoff.
The estimated superfecta probability is abcd/[a(1-a)(1-a-b)(1-a-b-c)] where a is the subjective win probability of the winner, b is the subjective win probability of the second place finisher, c is the subjective win probability of the third place finisher, and d is the subjective win probability of the fourth place finisher.
The efficiency ratio = predicted payoff / actual payoff
For both CD and NYRA there are no significant differences between the efficiency ratio from the dollar to the dime era.
CD: Dollar era 1.200, Dime era 1.192
NYRA: Dollar era 1.110, Dime era 1.096
This runs counter to intuition. Increased access as a result of the reduction in the minimum should lead to more accurate pricing. Well, at least the sign is in the right direction.
Does the reduced minimum effect return?
There is no reason to expect differences in return. Remember moving from a dollar to a dime does not change the expected return on a wager. One of the complaints from bettors against dropping the minimum was that it would lead to lower payouts. Expected payouts are equal to 1 - takeout rates. If you bet the super, your expected return at CD is 81 cents for every dollar wagered and 75 cents for every dollar wagered at NYRA tracks. However, the variance of returns might change. Lower bet denominations allow bettors to cover more combinations, especially those that are extremely unlikely. Also casual bettors might play longshots in the super in hopes of low cost shot at a big payoff. Remember Giacomo's Derby produced a $864k superfecta payout and all winning ticker holders used the quick pick option. A result of the dime superfecta might be fewer extremely large payouts.
Here is the superfecta payoff information for before and after the denomination change:
Churchill Downs
Mean - $5102 to $4623
Median - $1182 to $945
Percentage of payouts less than 1,000 to 1 - 46.3% to 51.2%
Percentage of payouts greater than 10,000 to 1 - 11.3% to 7.5%
Churchill Downs saw drop in mean and median. There were fewer big payouts and more small payouts. Was it the due to the reduction in the minimum? I don't think so. I think the drop in purses as a result of the ADW lockout lead to a reduction in field size and subsequent drop in payouts.
NYRA
Mean - $6701 to $8642
Median - $1975 to $1991
Percentage of payouts less than 1,000 to 1 - 32.6% to 30.8%
Percentage of payouts greater than 10,000 to 1 - 15.4% to 14.6%
With NYRA we see an increase in the average payout and fewer really big or really small payouts.
We still have alot of work to do on this project. Getting another year of data is next on the agenda.
To study the dime super we looked at races from Churchill Downs and NYRA (Aqueduct, Belmont, Saratoga). We have data from CD starting with the Spring '05 meet and ending with the Spring '08 meet. CD introduced the dime super on May 9, 2007, giving us 1,353 dollar super races and 1,047 dime super races. Our NYRA data runs from 1/1/2005 to 10/02/08. The dime super was introduced in New York on September 30, 2007 leaving us with 1,546 dollar super races and 794 dime super races.
Does the reduced minimum effect betting handle?
Superfecta handle fell at both tracks (14% at CD and 4% at NYRA) after the reduction in the minimum from a dollar to a dime, but overall handle fell even more. The contraction in handle at Churchill Downs post 5/9/07 was a result of the standoff between the track and the horsemen that resulted in restricted access the CD pools. The exacta pool at CD fell by 28% and the trifecta pool by 31% from the previous period. NYRA also experienced declines - 15% in the exacta pool and 26% in the trifecta pool. Perhaps this could be attributed to the rough '08 meet at Saratoga which was hampered by bad weather. No matter what the reason, there was a decline in overall wagering from the dollar super period to the dime super period at CD and NYRA.
Did the lower denomination superfecta attract more or less money to betting pools controlling for the overall reduction in handle? Perhaps bettors that did not previously play the superfecta because of its $1 minimum are attracted to the dime version of the wager and increase superfecta handle. On the other hand, current $1 superfecta players may just reduce their overall superfecta betting as a result of the lower minimum and drive superfecta handle down. Looking at the ratio of superfecta to trifecta and superfecta to exacta handle controls for the overall reduction in betting. The ratio of the superfecta to trifecta pool was 35% at both CD and NYRA with dollar supers and increased to 45% at CD and 47% at NYRA with dime supers. The ratio of the superfecta to exacta pool was 28% at CD and 27% at NYRA with dollar supers and 36% at CD and 32% at NYRA with dime supers. These numbers indicate that moving from a dollar to a dime increased superfecta handle.
Did the change have a positive impact on overall handle? There is potential that the dime super could shark, or take money away from, the trifecta pool. The superfecta can be viewed as a substitute for the trifecta and increased accessibility might steer bettors from the $1 trifecta to the dime superfecta. If we assume that the superfecta is unrelated to the exacta then we can compare the change in the super/tri ratio to the super/exacta ratio for evidence of sharking. At Churchill Downs the denomination change appears to only have a slight effect on the trifecta pool. The superfecta did increase 10 percentage points on the trifecta (super/tri ratio) but gained a similar 8 percentage points on the exacta (super/exacta ratio). Furthermore the trifecta to exacta ratio experienced only a slight decrease from 81% to 79%. At NYRA tracks the dime super did take a bite out of the trifecta. The superfecta pool gained 12% on the trifecta and only 5% on the exacta. The trifecta/exacta ratio fell from 76% to 68%.
Does the reduced minimum effect efficiency?
Measuring efficiency involves somehow determining if public accurately assesses the true probability of outcomes. FInding true probabilities (referred to as objective probabilities in the literature) is iffy enough for win wagers. So here is what we are doing (file this under two wrongs make a right) - we are calculating the probability of the superfecta outcome using win probabilities derived from betting in the win pool (called the subjective win probability). From the superfecta probability we get a predicted payoff and compare this to the actual payoff.
The estimated superfecta probability is abcd/[a(1-a)(1-a-b)(1-a-b-c)] where a is the subjective win probability of the winner, b is the subjective win probability of the second place finisher, c is the subjective win probability of the third place finisher, and d is the subjective win probability of the fourth place finisher.
The efficiency ratio = predicted payoff / actual payoff
For both CD and NYRA there are no significant differences between the efficiency ratio from the dollar to the dime era.
CD: Dollar era 1.200, Dime era 1.192
NYRA: Dollar era 1.110, Dime era 1.096
This runs counter to intuition. Increased access as a result of the reduction in the minimum should lead to more accurate pricing. Well, at least the sign is in the right direction.
Does the reduced minimum effect return?
There is no reason to expect differences in return. Remember moving from a dollar to a dime does not change the expected return on a wager. One of the complaints from bettors against dropping the minimum was that it would lead to lower payouts. Expected payouts are equal to 1 - takeout rates. If you bet the super, your expected return at CD is 81 cents for every dollar wagered and 75 cents for every dollar wagered at NYRA tracks. However, the variance of returns might change. Lower bet denominations allow bettors to cover more combinations, especially those that are extremely unlikely. Also casual bettors might play longshots in the super in hopes of low cost shot at a big payoff. Remember Giacomo's Derby produced a $864k superfecta payout and all winning ticker holders used the quick pick option. A result of the dime superfecta might be fewer extremely large payouts.
Here is the superfecta payoff information for before and after the denomination change:
Churchill Downs
Mean - $5102 to $4623
Median - $1182 to $945
Percentage of payouts less than 1,000 to 1 - 46.3% to 51.2%
Percentage of payouts greater than 10,000 to 1 - 11.3% to 7.5%
Churchill Downs saw drop in mean and median. There were fewer big payouts and more small payouts. Was it the due to the reduction in the minimum? I don't think so. I think the drop in purses as a result of the ADW lockout lead to a reduction in field size and subsequent drop in payouts.
NYRA
Mean - $6701 to $8642
Median - $1975 to $1991
Percentage of payouts less than 1,000 to 1 - 32.6% to 30.8%
Percentage of payouts greater than 10,000 to 1 - 15.4% to 14.6%
With NYRA we see an increase in the average payout and fewer really big or really small payouts.
We still have alot of work to do on this project. Getting another year of data is next on the agenda.
The question I am really interested in is does the dime super eliminate "pool scooping"? My guess is yes but we have to see what the data say.
Reply to this