Suppose Rice is playing Texas in a college basketball game. The Vegas line favors Rice by 3, so a -3 appears next to Rice. The Power Rank predicts a 3.1 point margin for Rice. The claim is that one should not wager on this game.
Why? Consider how wagering works. Right next to the line, there’s usually the number -110. This means that one must bet $110 in order to win $100. For our example above, let’s suppose one bets $110 on Rice. If Rice wins by more that 3, Vegas would return $210, the original wager plus $100 in winnings. If Rice wins by 2 or 1 or loses, the $110 wager is lost. If Rice wins by 3, Vegas returns the $110 wager in a push. The last $10 in the wager is the house profit.
If you’ll take our word for it, Rice must win by more than 3 with probability 110/210=0.524 to make money on average. In other words, if Rice and Texas played this games 1000 times, one would like Rice to win by 3 at least 524 times. This extra two percent is required to overcome the house profit. If The Power Rank says Rice by 3.1, it’s 50-50 whether Rice wins by more or less than 3. That’s not enough of an edge to make a wager. The market has been efficient in setting the line at -3 for Rice.
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