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Old 12-31-2010, 03:58 AM   #145
Jeff P
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With hundreds of posts and many links I may have missed it, but has anyone calculated and posted a chart showing theoretical payoffs as they are now compared to what they will be on the 1st? For example, assume an exacta and a pick 3 each pay $100 for a $1 wager Friday. What would they pay starting Saturday with the increased takeout? Rounding off the numbers, since the increases are 2% and 3%, would the payoffs then be 98 and 97 dollars respectively? Or, since the percentage increases are roughly 10% and 15% increases over the old rate, would the payoffs then be $90 and $85? Or would the new payoffs fall somewhere in between? Some of you have very good math skills, and could calculate this fairly easily, I would imagine. In presenting the downsides of the takeout increase to other players it would be very helpful if we could state some hard numbers between the old and new, rather than just insisting that the higher rate is bad without some numbers to back us up.
For exotic wagers involving 3 or more betting interests (such as a trifecta, pick3, pick4, etc.) the new takeout is 14.51 percent higher than the old takeout...

calculated as:
.2368 / .2068 = 1.1451

For the sake of argument, let's assume a trifecta pool of exactly 100k where one lucky bettor has the only winning combination.

Without consideration of breakage (which is another matter entirely) the approximate payoff under the higher takeout would be: $76,320.00.

Here's the (approximate) math behind the payout:
Prize Payout = (1 minus the takeout) x (pool amount)
or:
Prize Payout = (1.00 - .2368) x (100,000)
or:
76,320.00 = (.7632) x (100,000)

Without consideration of breakage (again, another matter entirely) the approximate payoff under the old takeout would be: $79,320.00.

Here's the (approximate) math behind the payout:
Prize Payout = (1 minus the takeout) x (pool amount)
or:
Prize Payout = (1.00 - .2068) x (100,000)
or:
79,320.00 = (.7932) x (100,000)

Ok. Back to answering your question...

Under the higher takeout, the bettor receives a payoff $3,000.00 less than is paid under the old takeout.

One could argue that the reduced payoff under the higher takeout is approximately 4% lower than the payoff under the old takeout.

However:

Once that $3,000.00 is lifted from the player's wallet (and that's EXACTLY what is happening here) that $3,000.00 can not be re-bet (churned) by the player.

I once read a paper (funded by the industry) indicating an estimated churn factor of 7... Meaning that under normal conditions players can be (collectively) expected to re-bet payoffs received 7 times.

Roughly translated, that $3,000.00 lifted from the player's pocket (again, that's EXACTLY what's happening here) represents $21,000.00 in handle that completely disappears from the pools... which in turn results in less money bet into other pools by other players.

Hope I managed to answer your question in a way that makes sense.

-jp

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Last edited by Jeff P; 12-31-2010 at 04:00 AM.
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