Product bundling and a rule of thumb versus the Harville formulae: can each way bets with UK bookmakers generate abnormal returns

Bookmakers practise a type of product bundling. To bet a horse for a place a punter has to bet an equal amount for a win. The returns to the place com ponent of the bet are determined by a rule of thumb. This paper examines wh ether the product bundling negates a betting strategy that endeavours to ex ploit any inefficiency in pricing of the place component of each way bets b ased on the Harville formulae. In order to implement the Harville formulae Shin probabilities are employed, which correct for the favourite longshot b ias in starting price odds, as measures of win probabilities. The analysis suggests that small positive expected returns to each way bets appear to ex ist.