Pari-Mutuel Revenues
Categories: Financial Theory
If you've ever been to a racetrack, you know how pari-mutuel betting works. It's how betting on horse racing works (as well as other racing variants: greyhound, cockroach, etc.)
You make a $10 win bet on the number-four horse in the sixth race, Pound the Turf 'til Wet. That bet goes into a big pile of all the win bets. Any money bet on any horse to win the sixth race goes into a pile.
The odds are determined by how much money each horse's betters contributed to the overall pile. If Pound the Turf gets $5,000 worth of action and the total win pool is $50,000...then Pound the Turf has 10-to-1 odds. If he wins, your $10 bet pays $100.
Pari-mutuel revenue is the amount of money the racetrack makes off its betting. Like any casino, the racetrack takes a portion of the money bet. It's like the rake in poker. The amount of cash the track brings in from these operations are known as pari-mutuel revenue...as opposed to hot dog revenue, or beer revenue, or slot machine revenue, etc.
