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Economics of Casino Gambling

posted Apr 11, 2012, 8:04 PM by Simon Nguyen
Major gambling entities spend millions of dollars each year on the detection and prevention of high-frequency luck. While it is only natural that casinos and betting sites would want to eradicate cheating and fraud, some gamblers are being blacklisted or banned from casinos even though they have never been found to have cheated. People are apparently punished for being too lucky.

Are the casinos money-hungry corporations who take advantage of the gambler’s misfortune while refusing to pay for their own misfortune?

Although I have no high regard for gambling firms, I would have to defend their calculated actions. The gambling business works much like the insurance business. Every time someone places a bet, he or she is actually contributing to a “pot”. The more people gamble the bigger the pot. If someone happens to win the bet, the casino will pay the winner with money from the pot. What is remained of the “pot” then becomes the casino’s profits. For the business to be profitable, the casino needs people to win less often than losing.

Since the odd of winning a bet is on average very low, the gambling business is extremely lucrative. Casinos do not mind if you win money as long as the frequency of winning is low. If a gambler is consistently lucky, that would pretty much break the casino’s business model and severely cut into its profit. It is this reason which I believe gambling entities have every right to prevent such an anomaly as to remain financially viable. This is not unlike American insurance companies refusing to provide flooding/wind insurance to people living in the U.S. Gulf States where powerful storms are the norms.

If you have followed this website for sometime, you would have come to realize how much I despise the gambling industry. I don’t mind gambling entities making money (lots of) even if it is on other people’s misfortunes. My grudge with them is with regards to what they have to do to grow their business. Since they need a constant inflow of new gamblers and people do not become gamblers without a cause, gambling entities need to somehow motivate or create an environment for people to become gamblers.

In recent years, poker has become wildly popular in the United States. This is mostly due to high-stake poker tournaments becoming a fixture on American television. Additionally, poker websites are popping up everywhere offering big prizes for online tournaments.

Call me naïve (sarcasm) but I don’t believe this is coincidental .The victims of the poker phenomenon appear to be young college students. These foolish youths are giving up dreams of becoming doctors and engineers in pursuit of career as professional poker players.

Simon Nguyen, M.A. Economics

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