Who Pays the Vig?

Phil brought up an interesting point yesterday in the comments (first commenter status!) when he said that the winner keeps the vig. That’s the traditional thought… the one that would make sense… the loser is the only one who pays up and the winner is the only one who collects… But, not so fast my friends! There’s actually quite an intellectual debate out there over whether the loser or the winner of bets technically pays the bookie his vig.

One could look at it one of two ways.

The loser pays:
The loser had to lay $110 to win $100. That $10 is his payment to the bookie for the privilege of placing a bet. Of his $110, $10 was a lost sunk cost and only $100 was actively wagered. He is the one who pays the vig.

The winner pays:
The winner had to lay $110 to win $100. Instead of getting true odds and getting paid $220, he only receives the $100 back (Total of $210). He spends that $10 for the privilege of placing a bet. He is the one who pays the vig.

So, which is it??

The answer, like most things, lies in the murky middle. Only through a thorough examination of each individual bettor’s tendencies towards true odds and vig-ed odds can a calculation be made.