A Bookmaker or Market Type Test for Specification in Discrete Choice Models
This paper suggests that the predicted probabilities of outcomes given by an estimated discrete choice model by thought of as prices (or bookmaker odds) associated with those outcomes. By buying or selling contracts (gambling) at those prices (odds) it should not be possible to, on average, make a proﬁt if the model is well speciﬁed and is generating “correct” prices. This notion then forms the basis of a model speciﬁcation test.
Beggs, John J., "A Bookmaker or Market Type Test for Specification in Discrete Choice Models" (1982). Cowles Foundation Discussion Papers. 871.