Why do betting companies pay out early?

You will often (at least in countries where betting is legal) hear about betting companies paying out early on big events (e.g. Paddy Power is paying out for an Obama win). Is there any economic reason for this ? (it would seem better to get 24 hours of interest on that money, no matter how sure they are of the result). Or is it purely a publicity trick? (I am sure Paddy Power got more mentions in the mainstream US press today than any other time).

I would guess there’s a fee for the early payout. That would allow the bookie to save some money on an outcome they think is likely.

If there isn’t a fee, then it’s a publicity stunt.

A WAG but suppose a bookie wants to stop accepting bets on Obama because he figures Obama is going to win. So he closes the betting. He might be required to pay off the bets within a certain time period of the betting being closed.

Cocky bravado, I think.

They’ve releases press releases about it, according an article from business insider, who received one. This suggests it’s a publicity stunt. They apparently make a habit of settling early. They lost money when Yang Yong-eun beat Tiger Woods in the 2009 PGA Champsionship: http://www.metro.co.uk/sport/oddballs/721086-bookmakers-paddy-power-pays-out-early-on-woods-and-loses-1-3m. The links article says Paddy Power are “renowned for settling its bets early”, which could be a nice selling point.

I did wonder if Paddy Power were closing the betting, Little Nemo, but it’s still listed on the website. It’s possible they aren’t taking bets in their betting shops though.

My money’s on publicity stunt, getting Paddy Power in the news, and pushing the selling point that Paddy Power will settle early.