Blowouts Likely Target Of Point-Shaving
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Like a lot of hoops fans, I was stunned by Friday’s news that the FBI is investigating whether a former NBA referee, Tim Donaghy, was involved in altering final scores to satisfy betting mobsters.
If this was one isolated incident, and no actual outcomes needed to be reversed, then I would think this would be merely a black eye for the sport. But one-time injuries heal. If it went deeper, and it is discovered that more officials were involved and outcomes were indeed changed, then it might take decades for the sport to recover any integrity.
Sports gambling can provide a good microcosm for economic study. The spread functions as a price, and betting on the favorite or the underdog functions as competing sets of demand. In a perfectly efficient market, the spread will move enough to encourage roughly equal amounts of betting on both the favorite and the underdog, which maximizes the house’s take from the bettors (the house takes a fee from the winner’s share and keeps all of the losing bets).
A soon-to-be-published study by a Stanford University economist, Jonathan Gibbs, takes a look at how the spread and the final scores of games interacted over the past 14 NBA seasons. Unlike some academics studying the sport, Gibbs has a basketball background: He was a varsity high school basketball player and served for two seasons as a male practice player for the Stanford Cardinal women’s team.
In his initial findings, the market looked efficient. The underdogs won 7,822 games and the favorites won 7,805. This 50.05% to 49.95% rate is consistent with an efficient market and suggests little possibility for wrongdoing. It wasn’t until Gibbs dug deeper into the data that red flags began to appear.
Gibbs separated the games into three categories, those with small (six points or less), medium (6.5 to 12 points) and large (12.5 points and higher) point spreads. The games with medium-sized point spreads had the normal distribution of forecast errors, but the games with small and large point spreads failed to adhere to established models of forecasting. In close games, favorites won and covered the spread more than would be predicted. Gibbs then created a second set of play-byplay data of the last five years of games to test his own theory that theoretically close games often exceed final margins of more than six points due to good free throw shooting by the favored team with the lead late in the game. This ultimately makes the trailing underdog throw in the towel once a close game has become a three-possession contest with less than 24 seconds to go. The second set of data bore out this supposition.
The games with large point spreads proved more problematic. The underdogs covered in those games at a greater rate than the Gibbs forecast models would predict. Teams won but failed to cover 40.9% of the time, a good bit more than the 37.7% forecast predicted by the Gibbs models. This discrepancy is where point-shaving either by players or — as the FBI investigation indicates — by referees could come into play.
The Gibbs study demonstrates that there is an under-the-radar — until now, at least — opportunity for unscrupulous players or officials to artificially impact the margin of victory in a way that benefits bettors. But the data also suggests that it is very unlikely that something on the order of the Black Sox scandal, when eight members of the Chicago White Sox conspired to throw the 1919 World Series, has taken place. The integrity of the game will suffer from the Donaghy investigation, but the game itself will not incur permanent damage. But the next time a team loses due to a controversial call, expect a lot of bad jokes and unnecessarily raised eyebrows.
The Gibbs study allays my worst fears, and we will await further comment from the league, which is due later this week, about how the information came to light. The league needs to announce what steps are being done to limit the damage and ensure that the people who legislate NBA action are free of outside influences and ulterior motives. Unless new evidence comes to light, the data in the Gibbs study is a solid reassurance that the major story in the NBA this fall will be the debuts of Greg Oden and Kevin Durant — not a point-shaving scandal.
