Print this page

Online Sports Betting Sites: Are Their Prices Inelastic?

Online Sports Betting Sites: Are Their Prices Inelastic?
12 Jan
2022
Not in Hall of Fame

Many online sportsbooks in the U.S. today are marketing to recreational bettors. Offers like welcome bonuses and loyalty rewards may entice more people to consider betting online.

This strategy appears to be aimed at increasing the sportsbooks’ customer base. These offers may also affect the customers’ decision-making and betting behavior more than the pricing can.

With its legalization in the U.S. in 2018, sports betting has become more accessible to more people. Furthermore, the recent COVID-19 pandemic has driven more people to stay at home and spend more time and money on online betting.

In 2020, sports betting generated a $1 billion revenue in the U.S. At the beginning of 2021, 23.2 million Americans expressed interest in betting $4.3 billion on the Super Bowl alone, and 7.6 million people said they would bet online.

With this current landscape, online gambling may be expected to grow into a $100 billion industry by 2026.

As more sports betting sites appear, the need to offer competitive prices to bettors becomes paramount. In this case, will adjusting prices be enough to increase the demand for online betting?

This article discusses price elasticity in sports betting and the factors that affect sports betting demand in the U.S.

Price Elasticity in Online Sports Betting

Theoretically, if online sports betting prices were elastic, demand should change significantly with only a slight price change.

For example, a slight reduction in a bookmaker’s vig can narrow their profit margin. However, that reduction may significantly increase the number of bets. In this case, the bookmaker’s prices may be relatively elastic.

However, are price changes sufficient to significantly change the demand for sports betting in real-world scenarios? Put another way, do price changes even matter when sportsbooks try to market their products?

Below are some factors that can influence bettors’ preferences when it comes to online sports betting.

Factors Affecting Sports Betting Demand in the U.S.

Price

Historically, Las Vegas and U.S.-facing offshore sportsbooks significantly influenced how line prices were set.

Nowadays, because of U.S. market regulations, operators and sportsbook suppliers in large states are now playing a role in providing competitive prices.

In addition, the regulations ensure that the operators are pricing their lines competitively.

A sportsbook with a high price elasticity should experience a high surge in demand with just a slight reduction to its vig. Alternatively, bettors may shy away from the sportsbook if it were to increase its house take.

However, that scenario is only theoretical, and pricing is not the only factor influencing demand for online sports betting.

Brand Association

Bettors also look into an online sportsbook’s brand reputation and association. Most legally operating sportsbooks have partnerships with physical and online casinos, big sports betting brands, or other gambling entities that give the sportsbook more credibility.

This credibility is likely to increase the sportsbook’s value and make bettors trust the sportsbook more. This trust may influence the bettor’s behavior in favor of the sportsbook, dictated not only by the price but also by the brand.

For example, partnerships with major sports leagues mean the sportsbook is reliable enough to be recognized by those leagues.

Other betting sites may receive backing from big brands. If bettors prefer those brands, the sponsorship may increase the chances of the bettor favoring the sportsbook.

On-Par Product and Experience Delivery

Competitive pricing and reputable brand association may not be enough to influence demand. Bettors may also ask for products and services of equal or higher value to the sportsbooks’ prices.

One way for this strategy to work is to ensure that bettors experience the convenience worth their money. This way, pricing may matter less as long as the bettor experiences quality service.

For example, the bookmaker’s online platform must be user-friendly and navigable. Sportsbooks may also provide welcome bonuses and rewards for bettors to maximize their deposits.

If the sportsbook has a mobile app, that feature may be considered a plus for accessibility. Mobile apps allow bettors to place bets, even when traveling or watching a live game in a stadium.

Additional payment options other than credit cards can also favor both the bookmaker and the customer.

More options to fund betting accounts, like online payment gateways, provide more convenience to bettors, increasing customer demand for the bookmaker’s services.

Other features that can add to a sportsbook’s ability to deliver quality services include moderating a bettor’s gambling habits and protecting their personal information.

Bettors must know that their private data is safe or that the sportsbook cares enough to help them curb developing gambling problems. These efforts may help them associate a positive experience with the sportsbook.

Bookmakers can further improve customer experience if they have a connection with advocacy groups promoting responsible gambling. This connection shows that the sportsbook encourages bettors to have a healthy gambling lifestyle.

Legal vs. Offshore Operators

The issue between offshore and U.S.-based legal sportsbook operators is that the U.S. sportsbooks are regulated while the offshore ones are not. This situation puts the U.S. sportsbooks in a challenging position against their offshore counterparts.

U.S. operators may think of offering products and services at par with the offshore operators to remain competitive. However, bettors may see no incentive to prefer U.S. sportsbooks if this were the case.

Instead, U.S. operators need to offer better products and services than offshore sportsbooks’ to stay on top of the game.

Conclusion

Demand for online sports betting is unlikely to change by simply adjusting the prices offered by the bookmakers. For some people, this situation may be indicative of price inelasticity.

That said, other factors have to be considered, including brand association, product and experience delivery, and the choice between offshore and legal operators.

These factors may affect the bettors’ outlook toward the sportsbook and influence demand more than just price changes alone can do.

Individuals interested in online sports betting should check their local state laws if sports betting is legal in their area.

Tagged under
Committee Chairman

Kirk Buchner, "The Committee Chairman", is the owner and operator of the site.  Kirk can be contacted at [email protected] .