Quote:
Originally Posted by thaskalos
Yes...but how do we define the term "optimal price" as it applies to the topic of parimutuel takeout? Is the "optimal takeout" the takeout percentage that would lead to the highest betting handle...or is it the takeout percentage which would lead to the highest overall profit for the track? Because these two are not necessarily the same thing.
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Quote:
Originally Posted by The_Turf_Monster
...Still waiting for HANA to define this……
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I defined optimal takeout on the HANA site back in 2010 as the price point that would generate max revenue (gross profit) for tracks and max purse money for horsemen generated by parimutuel handle.
by: Jeff Platt | 02/17/2010
Takeout Elasticity Model:
http://www.horseplayersassociation.o...eoutmodel.html
Quote:
Code:
Simple Takeout Elasticity Model
Takeout Handle Takeout
Rate Dollars Dollars
--------------------------
.12 19200 2304
.13 18100 2353
.14 16900 2366***
.15 15800 2370***
.16 14600 2336
.17 13500 2295
.18 12300 2214
.19 11200 2128
.20 10000 2000
Note that total takeout dollars... the actual revenue available for distribution is 18% higher at 14 percent takeout than it is at 20% takeout.
Based on this model, the optimal pricing point for takeout would be between 14 and 15 percent... Put another way, a takeout of between 14% and 15% (instead of the current 22% blended takeout) would maximize revenue available for distribution to the shareholders of the track. It would also maximize revenue available for distribution as purses.
Understand that the model in the paper is a simple one. In real life, it's more complicated than that. Different on track pools have different elasticities.
A pick six, for example, is less sensitive to changes in takeout than a win or exacta pool. Also, because of pricing spelled out in track signal contract language - intertrack wagering, ADW wagering, and rebates each have elements that create different elasticities. In real life it's more complicated than a simple one size fits all takeout elasticity = X.
That said, even though the study is a bit dated, the concepts presented inside remain quite valid.
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-jp
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