Does Casino Always Win
For most seasoned gamblers brutally honest with themselves, they’ve come to accept the supposed number 1 rule in gambling; ‘the house always wins!’
Well, there’s always the skeptical lot, but sooner or later, that is a rule they come to accept the hard way. It’s a lesson every gambler gets to learn on their gambling journey, and the earlier you understand this rule, the smoother your future gambling endeavors might get. Simply said, you can boost your odds against the house by understanding why they win most of the time.
However over the long term, the casino will always win more than the players. The reason for this is due to the Law of large numbers. All the games in the casino are designed to have a small edge in favour of the house. That is; the chances of the player winning are always slightly less than the chances of the casino winning. Sep 05, 2018 This Is Why the Casino Will Always Win After a Turn on the Slot Machine The gaming industry is big business in the US, contributing an estimated $240 billion to the economy each year while. Why Casinos Always Win in the End Episode 808. My $20 in nickels for a casino slot machine on a Friday night, or my $5 scratch ticket, or my one. Does the House Always Win? If you were under the impression that casinos have an equal chance of paying out and losing money, I am sorry to tell you that you are mistaken.
Now to answer your question ‘why does the house always win?’ read on to learn more!
Human Emotions
Part of being human means dealing with emotions. Unfortunately, not all these emotions play in our favor. If still unsure about that check out the ‘too emotional’ gamblers and see just how that works for them.
If you are the guy who is always chasing after your losses, without giving it much of thought simply because you are ‘too angry’, I don’t see how the casino won’t keep on winning.
Let’s say you’ve got a cool $1000 which you would want to start saving with your bank. For each year, the bank tells you will be earning 20%. This would translate to $200, and you obviously would be very happy about it. However, if you were to take a weekend trip to Vegas, entered a casino with $1000, and won $200 within less than an hour, you probably wouldn’t be satisfied.
For most players, they want more, and more. Before you realize it you make your first loss… But you are still ahead so you want to continue playing. The losses follow and before you realize it, you’ve lost it all in a matter of hours, sometimes, even minutes!
It does depend on why you were gambling in the first place. If it is for fun, well, and good because you are open to your game going either way. However, if you were hoping to make a reap off a casino, the advisable thing to do would be to walk away when you are still ahead.
Statistics show that up to 95% of players are ahead at some point in their game. But whenever one feels luck is on their side, we are tempted to push it a little further. Unfortunately, that doesn’t work out for most players.
The House Edge
The best way to understand a house edge would be by first acknowledging that a casino is a business. By that, it would mean that for them to remain operational, they have to ensure that they are running on a profit. For this, they design a small edge that will favor the house.
With the house edge, there’s nothing like a 50/50 chance. It ensures that the players’ probability of winning is slightly lower than those of the casino winning. Although the house edge might vary from game to game, it is still done with a lot of consideration to ensure that it is not set too high as it would discourage most gamblers from playing.
Examples of house edge are the number zero in roulette, or an early surrender when playing blackjack. Others examples include;
Blackjack: Casino 51% vs Player 49%
Roulette: Casino 52% vs Player 48%
Craps: Casino 50.5% vs Player 49.5%
In short, even if you made some good wins in the short run, the casino would still catch-up with you in the long-run –provided you continued playing.
The Law of Large Numbers and Gambler’s Ruin Concepts
The statistical law of large numbers may have slightly varying definitions depending on the area of use. However, in business, this law is used to show or express the relationship that exists between growth rate and scale.
In casinos, the house always wins because of the large number of bets placed. Without going too much into technical details, I will try to explain its application in casinos.
Taking roulette as an example, there are 37 numbers; 18 red, 18 black, and the number ‘0’. But even when the house has a rough edge ranging from 2-3%, it would not be a big surprise if a casino lost on some nights. However, since the edge is low, sometimes the players win and come back day 2 to keep on gambling.
In the long-run, the law of large numbers will ensure that the casino keeps on winning.
Let’s explore the Gamblers’ ruin concept in simple terms too. Assume that the outcome of a casino game has a 50/50 chance, meaning that the house edge is 0%. A gambler walks into a casino with $100. There’s a 100% probability that the gamblers’ bankroll will run into $0 before that of the casino.
This is simply because the casino has an unlimited bankroll which will exhaust the player off their money if they stick around long enough. The chances of the gambler exhausting their bankroll are even higher when there’s an active house edge.
Different Casino Games have Varying House Edge
As aforementioned, the house edge is what ensures that the casinos have slightly added advantage against the player. However, it is important to note that this house edge varies with different games.
For slots and keno, they carry the highest house edge with up to 25% and 17%, respectively. This would explain why slots account for 80% of profits made in a casino. With Blackjack, the house could go as low as 0.5% if a player followed perfect betting.
Similarly, Craps and baccarat players could enjoy low house odds of up to 0.8% and 1.06% respectively provided they play the odds perfectly. As you have already guessed, only a few people can achieve this. Hence, the house edge increases whenever players are not playing expertly.
Final Take
It might be true that the house always wins in the long-run. However, this shouldn’t work to disappoint you as an avid gambler. Rather, this should help you understand the common pitfalls and how you can avoid them.
The gaming industry is big business in the US, contributing an estimated $240 billion to the economy each year while generating $38 billion in tax revenues and supporting 17 million jobs.
What people may not realize is that slot machines, video poker machines, and other electronic gaming devices make up the bulk of all that economic activity. At casinos in Iowa and South Dakota, for example, such devices have contributed up to 89 percent of annual gaming revenue.
Spinning-reel slots, in particular, are profit juggernauts for most casinos, outperforming table games like blackjack, video poker machines, and other forms of gambling.
What about slot machines makes them such reliable money makers? In part, it has something to do with casinos’ ability to hide their true price from even the savviest of gamblers.
The Price of a Slot
An important economic theory holds that when the price of something goes up, demand for it tends to fall.
But that depends on price transparency, which exists for most of the day-to-day purchases we make. 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.
Slots may be even worse than the doctor’s office, in that most of us will never know the true price of our wagers. Which means the law of supply and demand breaks down.
Casino operators usually think of price in terms of what is known as the average or expected house advantage on each bet placed by players. Basically, it’s the long-term edge that is built into the game. For an individual player, his or her limited interaction with the game will result in a “price” that looks a lot different.
For example, consider a game with a 10-percent house advantage — which is fairly typical. This means that over the long run, the game will return 10 percent of all wagers it accepts to the casino that owns it. 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. Thus, from the management’s perspective, the “price” it charges is the 10 percent it expects to collect from gamblers over time.
Individual players, however, will likely define price as the cost of the spin. For example, if a player bets $1, spins the reels, and receives no payout, that’ll be the price — not 10 cents.
So who is correct? Both, in a way. While the game has certainly collected $1 from the player, management knows that eventually 90 cents of that will be dispensed to other players.
A 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. 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.
Short-Term vs. Long-Term
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. 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.
Let’s consider George, who just got his paycheck and heads to the casino with $80 to spend over an hour on a Tuesday night. There are basically three outcomes: He loses everything, hits a considerable jackpot and wins big, or makes or loses a little but manages to walk away before the odds turn decidedly against him.
Of course, the first outcome is far more common than the other two — it has to be for the casino to maintain its house advantage. The funds to pay big jackpots come from frequent losers (who get wiped out). Without all these losers, there can be no big winners — which is why so many people play in the first place.
Specifically, the sum of all the individual losses is used to fund the big jackpots. Therefore, to provide enticing jackpots, many players must lose all of their Tuesday night bankroll.
What is less obvious to many is that the long-term experience rarely occurs at the player level. That is, players rarely lose their $80 in a uniform manner (that is, a rate of 10 percent per spin). If this were the typical slot experience, it would be predictably disappointing. But it would make it very easy for a player to identify the price he’s paying.
Raising the Price
Ultimately, the casino is selling excitement, which is comprised of hope and variance. Even though a slot may have a modest house advantage from management’s perspective, such as four percent, it can and often does win all of George’s Tuesday night bankroll in short order.
This is primarily due to the variance in the slot machine’s pay table — which lists all the winning symbol combinations and the number of credits awarded for each one. While the pay table is visible to the player, the probability of producing each winning symbol combination remains hidden. Of course, these probabilities are a critical determinant of the house advantage — that is, the long-term price of the wager.
Does Casino Always Win No Deposit
This rare ability to hide the price of a good or service offers an opportunity for casino management to raise the price without notifying the players — if they can get away with it.
Casino managers are under tremendous pressure to maximize their all-important slot revenue, but they do not want to kill the golden goose by raising the “price” too much. If players are able to detect these concealed price increases simply by playing the games, then they may choose to play at another casino.
Does Casino Always Win Cash
This terrifies casino operators, as it is difficult and expensive to recover from perceptions of a high-priced slot product.
Getting Away With It
Consequently, many operators resist increasing the house advantages of their slot machines, believing that players can detect these price shocks.
Our new research, however, has found that increases in the casino advantage have produced significant gains in revenue with no signs of detection even by savvy players. In multiple comparisons of two otherwise identical reel games, the high-priced games produced significantly greater revenue for the casino. These findings were confirmed in a second study.
Further analysis revealed no evidence of play migration from the high-priced games, despite the fact their low-priced counterparts were located a mere three feet away.
Importantly, these results occurred in spite of the egregious economic disincentive to play the high-priced games. That is, the visible pay tables were identical on both the high- and low-priced games, within each of the two-game pairings. The only difference was the concealed probabilities of each payout.
Armed with this knowledge, management may be more willing to increase prices. And for price-sensitive gamblers, reel slot machines may become something to avoid.
This article was originally published on The Conversation by Anthony Frederick Lucas. Read the original article here.