Economics of gambling: Difference between revisions
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==Estimated profitability of casino== |
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It is hard to find any statistics regarding the economics of casino. One can easily find reports on charitable activity of casino. It is much harder to find answers to the following questions. How much does an average casino make? What is the typical number of players per table? What is the typical bet (most people bet minimal bet; the bigger bets have progressively decreasing probability). What is the money extraction efficiency that is how many cents a casino receives for every dollar bet? This is a key question because a casino cannot possibly survive if they get 5%, dictated by statistics. The income of a casino host on average is $60 000 annually. Casino can at best get (2 players at a table X $5 bet every minute X 60 min/hour X 0.05 probability = $30 per hour) the same $60 000 annually per table. In reality, most of the tables have no players at all. They have the host + supervisor. The supervisor pretends to be a player, but you can clearly tell he is not. Unlike players he is very relaxed and talkative. He will ask you how is it going and explain you the rules. Now, would casino manage to beat statistics (ask crooked gamblers how) than the profitability can easily go up to $300 per hour. Now we are talking about busyness. A profitable, taxable business with a strong lobby. Statistical data would help to see which model is correct. Sadly, the statistical data is nowhere to be found. One can argue that we only accounted for the minimal bets instead of average bets. While this is correct, the average bet seems to be close enough to the minimal bet. Having said that statistical data on extraction coefficient plotted versus the size of the bet would be invaluable. I have a strong feeling that the extraction coefficient reaches 100% for big bets ($100+). This violates the probability theory but allows to get most money at a cost of disappointing one gambler. Further paragraphs of this article follow two golden rules of philosophy - talk about big things and avoid any numbers. |
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==Economic costs== |
==Economic costs== |
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Revision as of 15:09, 24 January 2013
 | This article possibly contains original research. |
Economic costs
As a result of gambling, some are driven to extreme lengths to cover debt. This can include acts such as robbery and assault. Severely addicted gamblers spend most of their energy following their addiction. They cost companies loss of productivity and profit. Gamblers themselves may suffer from depression and bankruptcy. Some may go into severe debt and suffer anxiety because of it. The social costs to society are varied and include unemployment benefits, family services and medical treatment to gamblers.[1]
In during times of economic success, casinos tend to take labor supply away from neighboring businesses. Since casinos offer higher wages than regular neighboring businesses, such as restaurants, employees leave the neighboring business and works for the casino. Customers who normally go to the neighboring restaurants now instead go to the casino for food. This demonstrates how not all growth by a casino can be attributed as economic growth; sometimes casinos merely transfer growth from other businesses into their own.[2]
Economic benefits
Gambling provides jobs since all commercial games require labor. Casinos require intensive labor including security guards, technical support staff, gaming staff, among others. In 1996, around 300,000 employees earned a total of US$7.7 billion within the US nation. This number does not include those who are indirectly involved with gambling, such as racing organizers. Employment resulting from gambling is difficult to estimate since gambling involves employees in many different stages. Entertainment is interlinked with gambling as well. Take for instance, the many shows available in casinos in Las Vegas. Hotel services and chauffeurs are also in higher demand because of gambling. As this shows, gambling increases aggregate demand for goods and services in the economy. In 1996, Americans spent 1 out of every US$10 on commercial gambling games. This money goes directly towards stimulating the economy. This expenditure on gambling can also be magnified when considering the multiplier effect.[3]
For example, say you play $1 in a slot machine. A portion of this $1 is then given to an employee of the casino as a form of wage (the rest must go to pay for upkeep, management, stockholders, etc). The employee then takes her portion of $1 and spends it in the casino restaurant. This portion of $1 is then taken by the restaurant, and a part of it is used to pay electric bills. This yet smaller portion of $1 is then taken by the electric company to pay the wage of their employee. This cycle continues on, till the original $1 that you have played become much more than $1. The highlight of this example is not merely that the multiplier effect occurs, since the multiplier effect occurs everywhere, but that since the casino itself is so big, the multiplier effect occurs within the same institution. Each time money is transacted, it contributes to GDP.[4]
Reasons for gambling institutions
In a study by Grinols, it was found that in the US, even though a state may not want to support a gambling institution, it would be economically beneficial for them to do so. If they did not support the institution, there would be many repercussions. This is because, neighboring states have gambling institutions. Residents of the local state will travel to these institutions and gamble nonetheless. This would take away profit and revenue form the resident state. Since these gamblers will gamble anyway, it is economically beneficial for a state to allow and support gambling institutions.[5]
Another study compared personal income to personal gambling expenditure and found that gambling occurs whether or not the country is in a recession. This aspect will attract states to invest in a institution that is basically recession-proof. During the Early 1990s recession, GGR (Gross Gambling Revenue) increased 9.4% even though the recession slowed personal income to 5.95%. This shows resilience of gambling to the effects of recessions.[6]
See also
References
- ^ Grinols, E L. (2004). Gambling Economics: Summary Facts. USA: Baylor University.
- ^ Grinols, E L. (2004). Gambling in America: Costs and Benefits. Cambridge, UK: Cambridge University Press.
- ^ Christiansen, E. M. (1998). Gambling and the American Economy. Annals of the American Academy of Political and Social Science, 556(1), 36-52.
- ^ Christiansen, E. M. (1998). Gambling and the American Economy. Annals of the American Academy of Political and Social Science, 556(1), 36-52.
- ^ Grinols, E L. (2004). Gambling in America: Costs and Benefits. Cambridge, UK: Cambridge University Press.
- ^ Christiansen, E. M. (1998). Gambling and the American Economy. Annals of the American Academy of Political and Social Science, 556(1), 36-52.