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Fanduel And Draftkings: Asymmetric Information: Case Study

1727 Words7 Pages

Chris Hassard
Professor Gan
ECN: 2020
10 November 2015

Fanduel and Draftkings: Asymmetric Information Sports betting industries like Fanduel and Draftkings are companies that sell fantasy sports daily. They are companies that sell one day contracts to customers by betting on professional athletes. The cost of a single professional athlete can vary from one dollar to thousands of dollars. The objective of the game is to invest in a player that you believe can play above his/her worth believed by the company. By the end of the game for the athlete, the reward or loss is proportionally factored into what you payed for. This means that the more money you put into a player, the higher the reward or loss is. Looking at the size and worth …show more content…

For example, an informed car dealer selling a used car to a uniformed buyer, or an uninformed health insurance company selling insurance to an informed buyer. When this happens, ineffective results usually occur. This is because the person that is informed knows what the best outcome is, while the other person has no idea. Fanduel and Draftkings will be arguing this very principle in court for the next few years. The courts will have to decide wether or not these companies possess a clear advantage over the …show more content…

There are too many people involved as well as billions of dollars at stake. Looking at the analysis, there is no question that big companies like Fanduel and Draftkings are able to obtain unfair advantages towards customers. People who are able to search or gamble more on products can make smarter decisions due to extra knowledge. The asymmetric principle clearly defines this. With that being said, sports gambling should be legalized and taxed by the government. Companies and customers both need to realize that in a world of free and accessible information, it is fair game to research more than the other party. When customers purchase entry fees, they need to understand that they are signing a contract at the same time. This contract figuratively states that researching more than someone else is technically fair because of the equal opportunity both parties possess. It will be exciting how sports gambling will be viewed in the next couple of years by the public. New Jersey has definetly been the most proactive state against this industry. If the government can one day tax this industry a significant amount, then it is safe to believe that sports gambling will remain legal. However, if the government cannot tax these companies, it is safe to say that the life of sports gambling may end

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