Are Tennis Matches Fixed?

Wimbledon is now upon us, and my thoughts turn to tennis. During the last year a number of professional tennis players admitted they have been contacted to fix professional tennis matches since Betfair voided all bets in August 2007 match between Nikolay Davydenko and Martin Vassallo. Betfair which allows betting before and during tennis matches received about 10 times the usual amount of betting - most on the lower seeded player - even after Davydenko won the first set. Davydenko eventually retire in the third set. Betfair's managing director stated, "...[w]e think the market quite clearly wasn't fair..." About two months later, suspisious betting patterns occurred on a WTA Tour event between Mariya Koryttseva and Tatiana Poutchek.

Subsequently, a number of tennis players, such as Dmitry Tursunov, Gilles Elseneer and Mahesh Bhupathi were offered money - in some cases more than $100,000 (US) to fix (lose) an ATP tennis match. All the players that have come forward have said they refused any match fixing offers. Big surprise! What would really be a surprising to me is if a tennis player said that they were offered money and they agreed to tank or fix a match.

While there is gambling on tennis, surely tennis players do not gamble - right? We have seen in the past some severe consequences of players gambling on sports. For instance, Pete Rose - who bet on his own club received a lifetime ban from baseball and Rick Tocchet as an assistant NHL coach was suspended over two years from the NHL for gambling (but not on hockey), so given the examples from other sports, professional tennis players would not be so foolish to take that risk!

Evently Alessio di Mauro was willing to take that risk. di Mauro was banned from the ATP for nine months and fined $60,000 for betting on tennis. Four other Italians, Potito Starace - banned six weeks and fined $30,000; Daniele Bracciali - banned three months and fined $20,000; Giorgio Galimberti - banned 100 days and fined $35,000; and Federico Luzzi - banned 200 days and $50,000 have been found guilty of betting on tennis. Giorgio Galimberti made 401 bets on 1796 tennis matches - including betting on his own matches - and he gets 100 days and a $35,000 fine! Is the ATP really serious about reducing tennis players gambling on tennis?

OK, here's my problem, does this make sense? Pete Rose - one of nine players at a time in baseball and who admitted to betting on baseball gets a lifetime ban (started in 1989); Rick Tocchet as an assistant coach who did not bet on hockey gets banned for more than two years and in tennis only person on one side of the match and is banned for on average about 80 days. I know that baseball, hockey and tennis are different sports, but shouldn't the penalty be proportional to the crime? Each seems arbitrary.

The ATP has regulations against gambling (up to three year ban and $100,000 fine) or match fixing (lifetime ban), but allegations still occur. (If you think this is an isolated incindent, check out the following article on suspicious betting on tennis matches). The ATP, ITF, WTA and the Grand Slam Committee are planning to come up with a unified set of regulations to combat match-fixing and illegal betting. I think a unified set of regulations are helpful in terms of the consistent penalties for match-fixing and illegal betting, but will not stop match-fixing or illegal betting. Since the personal marginal benefit of gambling/match-fixing is greater than the personal marginal cost then there is a private economic incentive to gamble or fix tennis matches by players.

In economic terms, this is a classic case of a negative externality. A negative externality occurs where there are costs imposed on others outside of the market transaction. The external cost is that the legitimacy of tennis matches is reduced and that those gambling on tennis without the inside information on match-fixing are likely to lose money at the expense of those with the inside information.

One economic solution is to internalize the negative externality. This just means that the cost borne on others - what economists call the marginal external cost - should be incorporated in the transaction. Many times this is done by the government in terms of a tax on the output or input that is causing the externality - such as gasoline. Here instead of a tax on the output, the odds makers could show the deviation from normal betting behavior on an individual match - right on the internet - and then have an additional cost that bettor's have to pay given the unusual betting pattern which could be indicating match-fixing. Once the additional fees bettors have to pay (marginal external cost) equals the gains from betting on match fixing players, the gains from fixing the match are significantly reduced and hence minimizes the incentive to fix matches. The fee would be determined by the degree of difference from normal betting behavior, so it would change with the deviation from the normal betting distribution.

Yes, but don't odds makers have an incentive to manipulate these results in their favor? You betcha! So to make this transparent a firm or firms separate from the bookies or odds makers could be started to do just this - in other words create a market and have the odds-makers use this information to set fees (if needed). As legal bets come in, the firm could statistically analyze the betting distribution as compared it to thousands of similar tennis matches. If there are any statistical deviations from the previous data, then an appropriate fee would be charged to offset the statistical deviation.

Would bettors go for this? I don't know, what do you think?