Demand for parimutuel horse race wagering with special reference to telephone betting

Abstract

Parimutuel horse race wagering (handle), measured in real terms, has been steadily declining for the past several decades. In an attempt to reverse this trend, a number of racetracks in the United States have instituted telephone betting systems which allow wagering from an ‘off-track’ location. The present study investigates the demand for parimutuel horse race wagering when a telephone betting system is implemented. Two demand equations are estimated for a racetrack, one for on-track (live race) handle and another for total (on-track plus telephone betting) handle. As expected, it is found that the telephone betting system has led to a decline in on-track wagering but surprisingly, it has also led to decline in total wagering, although not to the same extent as in on-track wagering. Thus, off-track wagering generated through the telephone betting system has not been sufficient to offset the loss in on-track handle. In addition to the effect of the telephone betting system, it is found that the takeout rate (price of wagering), the price of admissions, racing quality, racing days, and competition from professional sports and another racetrack in the market area are significant determinants of the demand for wagering. Demand is found to be elastic with respect to the takeout rate, inelastic with respect to the price of admissions and parking, and almost unitary elastic with respect to income.