This is one of the lessons I’ve learned in my more than three decades in the gambling industry analyzing the performance of casino games and as a researcher studying them. This difference in price perspective is rooted in the gap between the short-term view of the players and the long-term view of management. Table games like black jack are not nearly as lucrative – to the casino – as slots. And at this rate of play it could take years of playing a single slot machine for the casino’s long-term advantage to become evident. While the game has certainly collected $1 from the player, management knows that eventually 90 cents of that will be dispensed to other players.Ī player could never know this, however, given he will only be playing for an hour or two, during which he may hope a large payout will make up for his many losses and then some. For example, if a player bets $1, spins the reels and receives no payout, that’ll be the price – not 10 cents. Individual players, however, will likely define price as the cost of the spin. Thus from the management’s perspective, the “price” it charges is the 10 percent it expects to collect from gamblers over time. So if it accepts $1 million in wagers over 2 million spins, it would be expected to pay out $900,000, resulting in a casino gain of $100,000. This means that over the long run, the game will return 10 percent of all wagers it accepts to the casino that owns it. For an individual player, his or her limited interaction with the game will result in a “price” that looks a lot different.įor example, consider a game with a 10 percent house advantage – which is fairly typical.

Basically, it’s the long-term edge that is built into the game. Which means the law of supply and demand breaks down.Ĭasino operators usually think of price in terms of what is known as the average or expected house advantage on each bet placed by players.

Slots may be even worse than the doctor’s office, in that most of us will never know the true price of our wagers. That is, other than visits to the doctor’s office and possibly the auto mechanic, we know the price of most products and services before we decide to pay for them.

An important economic theory holds that when the price of something goes up, demand for it tends to fall.īut that depends on price transparency, which exists for most of the day-to-day purchases we make.

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