Decision support system for policy-making: Quantifying skill and chance in daily fantasy sports

We explore the question of skill versus chance dominance in Daily Fantasy Sports (DFS), which has been the subject of numerous legal disputes around the world. Our study examines whether a contestant's winnability in DFS is influenced by factors reflecting skills using cricket-based daily fantasy contest data AND a true fixed effects stochastic frontier model. We find that skill contributes significantly towards winnability in five ways. First, contestants performing well in the past do better in the present. Second, gaining more game experiences improves performance. Third, contestants who participated recently, tend to exhibit higher winnability. Fourth, selecting an appropriate contest type enhances winnability. Fifth, the large estimated signal-to-noise ratio indicates that the unobserved skill measured by a non-negative error has a much greater impact on winnability than the regular two-sided random shocks. These results are robust to varying specifications and subsets of data. Decision makers and regulators can use the model presented in the study to distinguish skill-dominant DFS from chance-dominant DFS.