Talk:Vigorish
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I think this is unnecessarily complicated. Vigorish is commission paid to the bookie, but in reality it's sort of like left over money after the payout. Exemplar:
Assume your bookie takes 11-10 bets, that means you have to put down 11 to make 10. So, say you want to win $100 bucks on "the game". You'd have to put down $110 to make $100. So lets say there are two guys that want to bet on the game with the same bookie on opposite sides. Each puts down $110, that means there's $220 in the bookie's pot. The guy that wins gets back his money ($110) and in addition gets his winnings ($100). That's $210 paid to the winner, and the remaining $10 goes to the bookie for being a cool guy. So, nobody "pays the vig", in reality. As the winner you get back exactly what you were promised. 11 got you 10, in this example. Varying the betting ratio allows the bookie to always make money, no matter who wins the event. All the money he doesn't pay out he keeps. Vigorish.
This is my understanding, anyway. I'm not actually a gambler, I just play one on tv. I didn't want to post this in the main article until someone checks it out, so I put it here in talk. If it looks right, anyone can add it in whatever form seems fitting to them. -AMichel
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The "Examples" and the other parts of this page explaining that only the winner pays the vig are not only awkwardly worded but some parts of them are just flatly wrong.
Only if you consider that two people who place opposing bets with the same bookmaker are competing for one another's money does this make any sense. This is, of course, wrong. They are competing for the bookie's money. Each of their wagers exists in a vaccum.
This also seems to assume that all people are betting $110 on things. The only way you get the number $110 is if you assume a base wager of $100 (like all bookies do) and factor in a 10% vig. To assume that the loser would have bet $110 had he not needed to pay vigorish is patently ridiculous.
Bettors are, in reality, WAGERING $100 of the money they give to bookmakers and paying $10 in commission. This situation is unchanged by the outcome of the bet.
I am going to correct this.
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I have read what is available on the internet about defining vigorish, and I think there is a major problem with the standard definition and that trying to say who is paying for the vigorish (the winner, the loser, or both) depends on your assumptions about their wagering habits. I think these assumptions should be made very clear in the definition.
First we need to establish how vigorish comes into play. It is most natural to assume that vigorish is factored in proportionally to the true odds, i.e. +100 vs +100 fair odds become -110 vs -110 with vigorish factored in, rather than something like -120 vs +100. And -200 vs +200 fair odds could become -220 vs +191.
To asses who pays the vigorish, we need to be able to talk about what bets would have been made if there was no vigorish (fair odds) and the difference in payouts with the presence of vigorish. This brings some inherent subjectivity into play, because we can't say exactly what bets someone would have made given fair odds, because this depends on the behavior of the gambler. But I believe there are several natural options to consider:
1.) The gambler has a given amount he wants to win, which is independent of the presence or absence of vigorish. As an example, with an even matchup we would have +100 vs +100 for fair odds, then a gambler wagers 100 to win 100. With vigorish, the odds might be -110 vs -110 and so gamblers must wager 110 to win 100. In this case, losers lose 110 under vig compared to 100 under fair odds, so the loser pays $10 extra. The winner gets back his 110 + 100 profit, compared to getting back his 100 + 100 profit, for no net difference, since he is up 100 net either way. So the loser pays the full vigorish under this assumption.
2.) The gambler has a given amount he is willing to risk. Under fair odds the gambler risks 100 to win 100. Under vigorish the gambler still risks 100 to win 100*(100/110) = 90.1. Under this assumption, the loser loses 100 in both cases, so pays no vigorish, the winner wins 100 net under fair odds and 90.9 net under vigorish, so he pays 9.1 in vigorish. So the winner pays the full vigorish under this assumption.
3.) The gambler is a Kelly gambler, meaning he seeks to maximize his rate of return in the limit of infinite bets placed over time. In this case he will bet more when the payout reflects a bigger advantage for him (roughly speaking he will bet proportionaly to his edge). The fact that he bets at all indicates that he thinks he has an advantage in the bet, so the presence of vigorish cuts into this edge, since it reduces the payout for a given amount wagered. Therefore Kelly bettors on either side of the wager will both bet less than they would have at fair odds ( assuming proportional vigorish as outlined above). The loser ends up losing less than he would have with fair odds, so counter-intuitively losers do better with vigorish. The winner not only receives a lower payout factor on his bet, but he also risked less than he would have at fair odds, so he pays the full vigorish, plus the amount saved by the loser, since
(amount cost by winners) - (amount saved by the losers) = (full vigorish raked by the bookie)
must be true. So for Kelly gamblers, the losers pay negative vigorish, while the winners pay more than the full vigorish raked in by the bookie.
I think this clarifies the conversation regarding "who pays the vig." You cannot say precisely who pays it unless you define your gambler's behavior with respect to changing odds.
I am updating the page entry to reflect this.
I think it would be desirable to define a vigorish % and tell how to calculate it. With respect to my above clarification on who pays the vig, it makes no sense to talk about the vig % paid by a generalized gambler, since the % he pays depends on what bets he would have made at fair odds (whether he falls into category 1, 2, 3, or something else), and also on his win/loss percentage. These complications are not desirable to be contained in a fundamental definition of a concept. We can do without them if vig % is defined as the % lost to a risk free wager. Such a wager is made by betting all possible outcomes with relative amounts bet so that the gambler receives the same amount of money in any outcome of the event (the same as he started with less the vigorish). Such a wager is always possible, but I won't get into that derivation here. This is a natural definition, because risk does not come into play so it most closely reproduces the situation prior to the bet being placed. The only difference in your bankroll is what the bookie has taken, and he takes the same amount every time in every outcome.
For a two outcome event, this works out to
vigorish = 
where the p and q are the decimal payouts for each outcome. I will work out the formula for any number of countable outcomes later.
--Wstrong 04:42, 2 January 2007 (UTC)
Contents |
[edit] plagerism
eventhough the article cites a website at the bottom, it does not change the fact that most of this article is a direct lift from the other website.
[edit] Mafia Interest slang
Isn't vigorish also a slang word used by the Mafia in the U.S. to mean interest on an (illegal) loan?
[edit] Of course the winner pays the vig
The vigorish is the commission--the fee paid to the bookie for using his services.
If you and I bet $110 each on a sporting event, the loser ends up -$110 and the winner ends up +$110.
But if we go to a bookie and bet on opposite outcomes, the loser still ends up -$110, but the winner ends up only +$100.
So who pays the vig? The winner. He is the one who is out ten dollars because he used a bookie's services. The loser is out nothing for the use of a bookie.
67.185.114.32 23:56, 22 August 2006 (UTC)
No. He's out $110, let's say because the Jets lost. The fact that he lost the bet means that the bookie COULD HAVE counted on the Jets losing and pocketed $110 in theory! In reality, the bookie keeps only 10 of those dollars for his profit, just as he put away $10 of the other guy's money, and uses the rest to protect himself from any outcome. Also, the fact that the loser could have won only $100 from the bet, means that $10 was being held by the bookie. So, both winner and loser have paid the vig.
[edit] Question
Am I understanding this right? If you convert the odds from one bookie to percentages, the total percentage of all outcomes is above 100% so they make a profit. The amount that this is over 100% by is the vig? —The preceding unsigned comment was added by 84.67.208.14 (talk • contribs).
[edit] Simple Answer
This is a really simple question as far as who is paying the vig. Losing bettors pay the vig. How can the winners have paid the vig when they gets double their wager back and their vig back!?! The only people who actually end up having paid anything to the bookie in these bets are the losing bettors. What the vig does is reduce the potential return on any bet placed with a bookie. Winners may feel they are owed an extra 10%, but they are either ignorant of the commissions involved with bookies or just want more money.
[edit] Not so simple answer
If you're a bettor then you will place a wager if your perceived odds of an event happening are greater than the implicit odds in the moneyline that the bookmaker is offering. The only way to truly determine who is "paying" vigorish is to compare the odds that individuals are getting on their bet to the "true" odds that the event they are betting on will occur. Since there is no way of determining "true" odds and because of the rationale behind betting, it is the case that neither bettor is paying vigorish. This can still be reconciled with the fact that bookmakers earn profit. They earn their profit because the odds they offer are based on balancing their book so that they are indifferent to the outcome. This means that as new bets are made bookmakers will continually change the odds that they offer. Because bettors get different odds than other bettors it means that if you could compare bets to "true" odds you would find that vigorish paid would differ amongst all bettors with no reason for winners of the bet or losers of the bet to uniformly be paying the same vigorish. I don't like the examples that are listed about how in some cases one side of the bet pays and the other in other instances. It seems like others agree with me. I would like to replace that explanation with mine. Any comments?? --Skatastic
