What Difference Does an Equity Overlay Make in a Football Contest?

In the September issue of the Las Vegas Advisor, there is a discussion of overlays in football contests. In the article, you state, “An equity overlay occurs when more money is paid out in a guarantee than is collected in entry fees.” In the case of the Circa Survivor contest, what difference does this make? In that contest, you're competing against the other players, not the casino. Only the final winner gets the prize money; everyone else goes home with zero. What difference does an overlay make? It seems to me that in order to benefit from an equity overlay, you still have to win.

Circa Survivor isn't an overlay this year; it's a 100%-equity contest. That's good, but it would be even better if it was an overlay.

Specifically to your question, in the winner-take-all Survivor contest, you're correct that only one person (more if deals are made, which they often are) will benefit materially, but everyone who plays benefits mathematically if there's an overlay, because the expected return for all players rises as more money is added to the prize pool.

Think of a coin-flip contest that costs $10 to enter and has two players. Since each player has an equal chance of winning, both are mathematically entitled to 50% of the pool, which is an expectation of a $10 return (the amount of the entry fee). That's an even-equity contest. But if there's an extra $2 in the pot for a $22 first-place prize, then each player's expected win is $11, which yields an expected profit of $1 for both players every time the contest is played. That's an equity overlay. You don't know who will win in a single contest, but a $1 profit per player is the average result in every trial.

Over many contests, the value of the overlay will bear out. And that goes for all players, even when considering skill levels. The greater the overlay, the more the good players will win over time, the less the bad players will lose, and the average players will win rather than break even.

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jstewa22 Nov-07-2024

real vs theoretical money

This is an interesting concept to try to wrap your head around.  It's the same concept as a lot of gambling.  For example, what good is a 100.17% EV VP game like DB if you don't hit the royal?  Rare events are part of the EV for many games.  It comes down to real money vs theoretical money; mathematically, it's always correct to play a strategy that maximizes theoretical return, although people will argue that you should alter your strategy (not go for royals as much, for example) to minimize chasing rare outcomes (Rob Singer advocates this, for example, although he gives no alternative strategy, just belittles the mathematicians).  There's no good mathematical answer for this.  I guess the concept is that if you lived for a million years and entered a football contest wtih an overlay every year, you'd be ahead in the long run.

Kevin Lewis Nov-07-2024

Meaningless

There are occasions when state lotteries become +EV. So maybe your chances of winning increase from one in 250 million to one in 200 million. From a practical standpoint, you ain't gonna win, and buying a lottery ticket is equivalent to throwing money in the trash. If you enter Circa Survivor, you're gonna lose. Money down the toilet. Regardless of what the first prize may be. "But...but...what if I..." You won't. "But..." Nope. You won't.

sunny78 Nov-07-2024

meaningful

Hi Kevin!

Question of the Day - 07 November 2024

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