Making a Deal // Chopping an NCAA Bracket Pool HELP!

[dabluebery]

My friend is asking me for advice on his NCAA tournament pool. This is the situation;

First Prize pays $1500, second place is $375. Apparently second place is locked up already.

My friend wins the pool outright if UCLA beats LSU. If LSU beats UCLA, "Arnie" wins.

He wants to offer Arnie a deal, to reduce variance. Neither of us has any idea how to go about doing this, mostly because we have no idea how to translate the lines on the game into a % for each team winning.

I'm looking for a starting point in how to help him approach the deal. What % would be neutral EV, and then let him bargain from there.

[DougOzzzz]

Arnie should get about $850, given the current moneyline on the game.

[MCS]

Here's the way to think about it:

Both are guaranteed $375. So this game is worth the difference in first and second, which is $1500-$375 = $1125.

The probability of UCLA winning is about 43% (based on odds I found at pinnaclesports.com, a reliable and sharp sportsbook). The way to find this is to observe that the moneyline is LSU -138, UCLA +126. The "average" here is 132. So consider a "fair" line to be UCLA +132. Betting $100 on UCLA returns $0 for a loss and $232 for a win, so the fraction of the time UCLA has to win to make this profitable is 100/232, which is 43.1%.

Your friend's equity is (0.43)*($1125) = $484 (rounded).

So your friend deserves $375 guaranteed PLUS the expected $484. 375+484 = $859. So as Doug said, $850 is a pretty reasonable settlement. This would leave $925 for Arnie.

(Note that Arnie's equity is (0.57)*(1125) = $641, and that 375+641 = 916 = 1875-859, as we would expect.)

[DougOzzzz]

Actually, I interpreted the question differently than you did.

My $850 estimate was for Arnie, and was based on the assumption that some other guy (neither his friend, or Arnie) had 2nd place locked up but couldn't win first.

[WaimanaloSlim]

I interpreted the situation the same as you did: I thought a third party had already locked up 2nd place and $375 of the prize pool. I can't be sure if this reading is correct, of course.

I assumed 3rd place paid nothing (which may not be true) but if it is, the amount risked, their "buy-in," is relevant and we need to know this number to quantify the risk, the loss if a certain outcome happens.

So is this the situation?

1st: $1,500
2nd: $375
3rd: Loss of "buy-in."

[WFDeac]

Also important to note that your friend could bet LSU moneyline on a sportsbook (and pay vig) if Arnie doesn't want to deal (quite possible).

[MCS]

[ QUOTE ]
Actually, I interpreted the question differently than you did.

My $850 estimate was for Arnie, and was based on the assumption that some other guy (neither his friend, or Arnie) had 2nd place locked up but couldn't win first.

[/ QUOTE ]

Oh, right. I think your interpretation is correct. In that case I agree that it's (.57)(1500) = $855 for Arnie.

My summary of calculating the 43% still stands though.

[dabluebery]

I'm sorry for being vague. You guys got it right, though it took a liberal interpretation.

A third party has already locked up second place. The two making a deal are going to get first or third based on the outcome of the LSU / UCLA game. Shouldn't change anything because you guys got it anyway.

Rob