Aussie Rules Misbehaviour Market - An Introduction

As part of The Speccy's campaign for a commercial online betting service for AFL players' court appearances, we started a proof-of-concept prediction market, where anyone can play for free. This post introduces the Aussie Rules Misbehaviour Market (ARM) to help you get started.

First off, why are we doing this? The short answer is that prediction markets like this help people make informed choices. By providing a simple mechanism to share and aggregate information about likely future player misbehaviour, the community benefits in getting the best possible tip-offs. For example, if the odds dramatically shorten for one particular club, you may want to avoid their favoured drinking establishments. In effect, we're using the "wisdom of crowds" to provide a more specific and reliable AFL Footballer Threat Indicator.

The benefits for the individual punter come in bragging rights and the self-satisfaction that comes from out-punting everyone else. Of course, it's also good practice for when commercial wagering on AFL players in court starts up - and people are betting with real money.

The market itself is pretty straightforward to understand and operate, thanks to our partners at CrowdIQ. Each club has 1000 contracts (for a total of 16,000). Each contract will "pay out" $100 to the holder if and when that club is the first to have a player in court. All the rest pay out zero. All contracts are freely-traded in the interim at what ever price and volume participants wish. The price of a contract goes up and down over its lifetime, driven by buyers and sellers. The price is determined by how likely it is to pay out ie for that club to be the first with a player in court.

If the price of a contract on Collingwood is presently $20, that means that the market estimates the chances of Collingwood being the first club in court is 20%. If you reckon it's actually more - say 50% - then you should bid $21 and buy up as many as you can. If you think the chances are really much lower - say 5% - then you should sell any Collingwood contracts you own. (You could also try short selling, laying a Dutch Book or related strategies.)

There are many factors that will influence the price of a particular club's contract:

• Adding/dropping notorious players from the list


• "Free weekends" due to injuries or split rounds


• Lack of availability of cocaine


• Elimination in the finals


• Emotionally tough matches (drubbings and nail-biters)


• New batch of particularly strong crystal meth in town


• Team bonding sessions


• Schoolies week


• Sharp price movements in other clubs

This last one occurs because - in theory - all the probabilities should add to one. That means that if price increases for one club (ie odds shorten), then they must come down (ie odds lengthen) for the others. Savvy punters will take advantage of that fact in fine-tuning their portfolio.

Of course, there's a wealth of private information that influences prices too. This is where the punters' ability to sniff out rumours, anticipate crises and generally keep in touch with events comes to the fore. This is where it pays to keep an ear to the ground. So, if you're a door bitch, drug dealer, footy slut, trainer, barman, journo, hooker, bouncer, priest or police officer - you get an unfair advantage over the rest of us.

Most of the time, the contract prices will reflect the general assessment of the lawlessness of each club. As such, they reflect a kind of broad-based reputation. Things get volatile when a scandal or criminal incident breaks. It could play out in a number of different ways. Suppose the matter is kept under wraps for a few days; only insiders will know and will have an opportunity to make a few judicious trades before it goes public. Once a player has been charged, it's almost certain they'll be in court. The price for that club will get close to $100, while all others tend to $0.

On other occasions, there may be a delay between an incident going public and the laying of charges - think Dean Brogan or Tarrant/Johnson - and there will be much speculation and volatility in the prices. Other times, it will be a dead cert that the player will be in court once it breaks (like Michael Gardiner) and the market acts like a raffle.

A couple of other matters about the structuring of the market.

The initial prices for the contracts are set by IPO (Initial Public Offering) via a Dutch auction. This means that people can bid silently up until this weekend ie Sunday, 13th of August on how many contracts they wish to buy. The system will automatically allocate them to punters, based on this auction. After this period, all contracts will be in flux and will be traded in the usual fashion.

So if you reckon each club is as bad as the next, then the "fair price" is $6.25 ($100/16) per contract. You may wish to set each club at a discount or premium to that "base rate" based on your assessments of their general lawlessness. Note: past behaviour is a good indicator of future behaviour, but it is no guarantee.

Contracts are "resolved" once a player appears (either in person or by a representative) in an Australian court facing criminal charges. To avoid contempt of court issues, this market does not allow speculation on any decisions or findings of the courts. It only pertains to new matters about incidents that have (allegedly) occurred prior to the start of the market. Therefore, re-appearances about older matters - such as sentencing, appeals etc - do not count.

The Speccy, as market manager, is responsible for deeming when a contract is resolved. We take all care in monitoring the media for this, but we are not infallible. Therefore, we're happy to take any tip-offs or leads about court events that we may have missed.

Once a contract is resolved, the market is closed, contracts "pay out" (winners are grinners) and a new market is established for the next round of speculation.

Ready? OK, check out the prices ... and happy punting!

Word Count: 1051

Tags: footy, court, scandals, gambling