Economics of gambling on sports: A multistage stochastic programming approach to American Jai Alai gambling strategies

With the increased gambling tolerance, the economic stake of gambling on sports is growing bigger than ever before. One common type is the para mutual gambling, where the gamblers bet on the results of games, such as Jai Alai, dog racing, horse racing, etc. Uncertainties lie both in the game itself and in the bets made by all gamblers. This study attempts to develop the optimum betting strategies for Jai Alai games based on the rules, the historical results and the random returns of each game. Two main concerns of this study are: modeling the randomness in both the game and the gambler sides, and formulating multistage stochastic mixed-integer models for the strategy-making problem to maximize the return and control the risk as well.