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Individual Risk Propensity and Risk Background
No full textThe paper considers the role that socio-psychological and socio-cultural factors play in individual decisions to take risk. The study employs four main measures of risk propensity: the mean probability of engaging in an investment, insurance or everyday gamble and the amount that would be invested in a hypothetical lottery. The study finds that gender had a significant influence on the probability of engaging in investment and everyday risk decisions, but a relatively insignificant impact on insurance decisions. The most important risk background variables were experience in making gambling decisions and confidence in making investment decisions. Similar results are obtained when the lottery-type measure of risk was employed
A MODEL FOR ESTIMATING THE PROBABILITIES OF SOCCER GAME RESULTS
No full textIn this paper, using Israeli soccer tournament results from 2009/2010 and an ordered dependent estimation model I calculated for each team, in each game played during the season, the a priori probability of a win, loss or a tie as a function of lag performance. Given these probabilities, the average probability that each team would end a game with a win, loss or a tie can be calculated.
AN ALTERNATIVE EXPLANATION OF THE FAVORITE-LONGSHOT BIAS
No full textEmpirical studies of horse race betting in the US, the UK, Australia, and Germany have empirically established the so called favorite-longshot bias. It was found that bets on longshots on average lose much more than bets on favorites. The theoretical literature on wagering markets has offered a variety of explanations for that bias. One of the most prominent is the assumption of a homogeneous bettor population with a preference for risk. However, the risk-love explanation has also been severely challenged. We add to this challenge by proposing a different explanation of the favorite-longshot bias. We show that if populations of bettors have only noisy estimates of horses’ true winning probabilities, a favorite-longshot bias will be the market equilibrium outcome even with risk neutral bettors and even if the median estimate is correct. We provide evidence on four different types of bets broadly consistent with the noisy estimates assumption but not with the risk-love explanation
WHY DO VARIOUS GAMING MARKETS ADOPT DIFFERENT TAX RATES?
No full textThis paper studies the welfare impact of a gaming tax in a two-sector, trade base equilibrium model. Its partial-equilibrium part examines tax divisions between market participants and the impact of this divisiveness on the relative price of gaming. The general-equilibrium part analyzes the welfare effect of the tax via the resultant relative-price change. We establish that market conditions such as supply capacity and market size have a clear bearing on tax division and overall welfare, and that a gaming tax is more likely to be economically bad if less of the tax burden can be passed along to tourist players. A high tax can only be applied if much of the tax is borne by visitors; a low tax has to be adopted if otherwise. Since its small adverse effect can be easily absorbed by its induced economic growth, a low gaming tax will attract outside investment conducive to overall efficiency. We also point out that policy concerns as well as market conditions may all affect tax regimes and their differences as observed in the American and Asian markets. We find that gaming business reality supports our theoretical assertions.This paper was presented at the Southern Economic Journal Symposium on Gambling, Prediction Markets and Public Policy on September 15-16, 2008 in Nottingham, U.K.; we thank conference participants for their helpful comments. Also, we have benefited a lot from intensive discussions with Ricardo Chi Sen Siu about gaming tax issues in each revision of this paper. The usual disclaimers apply
DOES SIZE REALLY MATTER? A REVIEW OF THE ROLE OF STAKE AND PRIZE LEVELS IN RELATION TO GAMBLING-RELATED HARM
Get PDFRegulatory and industry decisions influencing commercial gambling activities require clear understanding of the role that stakes and prizes play in the development and facilitation of gambling-related harm. Although industry proponents argue for increases in stakes and prizes to meet market demands, regulators remain cautious about the potential implication for gambling-related harm, while industry opponents generally condemn relaxing aspects of gambling policies. To inform this debate, this paper provides a critical examination of the relevant literature. From the review, it is concluded that limitations of the existing literature restrict our ability to draw definitive conclusions regarding the effects of stake and prize variables. Most studies contain multiple, methodological limitations, the most significant of which are diluted risk and reward scenarios used in analogue research settings not reflective of real gambling situations. In addition, there is a lack of conceptual clarity regarding many constructs, particularly the parameters defining jackpots, and the interactive nature and effect of the differing configurations of game parameters and environments are often not taken into consideration when investigating changes to one or more variables. Notwithstanding these limitations, there is sufficient evidence to suggest that stake and prize levels merit consideration in relation to harm minimisation efforts. However, substantial knowledge gaps currently exist, particularly in relation to understanding staking and prize thresholds for risky behaviour, how the impact of stakes and prizes change depending on the configuration and interaction of other game characteristics, and the role of individual and situational determinants. Based on the potential risk factors and the implications for commercial appeal, a player-focussed harm minimisation response may hold the most promise for future research and evaluation in jurisdictions where gambling is a legal and legitimate leisure activity.
Subjective Skewness of Return as an Explanation of the Optimal Choice between Gambles in Cumulative Prospect Theory
No full textGiven that the expected return and variance of return of two gambles are equal the hypothesis that the gamble with the greater positive skewness of return will be chosen by an expected utility maximiser is appealing. However the hypothesis is not, in general, correct. Brockett and Garven (1998) and Brocket and Kahane (1992) demonstrate this both theoretically and by constructing counter examples.A particularly revealing example is the following one constructed by Brockett and Kahane. Gamble A has the two outcomes 2.45 and 7.49 with probabilities 0.5141 and 0.4859 respectively. Gamble B has the three outcomes 0, 4.947 and 10 with probabilities 0.12096, 0.750085 and 0.128955 respectively. Even though gamble A exhibits lower expected return, a higher variance and lower positive skewness than gamble B it is preferred to gamble B by an expected utility maximiser on the basis of any standard utility function such as power, log or exponential. Consequently in this example of theirs the expected utility maximiser exhibits an aversion to higher expected return and higher skewness and a preference for higher variance. As noted by Brockett and Kahane these results cannot be dismissed as decision makers “trading” variance for mean or skewness or having a strange idiosyncratic utility function
THE FINANCIAL RETURNS TO CASINO AMENITIES
No full textCasinos offer an increasing array of amenities (e.g., hotels, restaurants, shows, shopping, and other entertainment). Yet, little information exists on the financial returns to various amenities. We utilize financial returns and casino company department revenue and expenditure data from 24 public casino firms over 23 quarters (2004.1-2009.3) to analyze the returns on investment from various casino amenities. Our findings indicate that investments in expanding casino space and hotels have negative returns; investment in food and beverage has a neutral impact; but investment in other types of entertainment has a positive return
ECONOMICS OF POKER: THE EFFECT OF SYSTEMIC CHANCE
No full textFor more than a millennium, people have been drawn to card games because they provide an interesting and entertaining forum for the elements of chance and skill to play out. Current players risk running afoul of the law when, in the course of play in a game of chance, money is wagered and won or lost. Several recent criminal and civil court actions in the U.S. have focused on the extent to which skill is a factor in the game of poker and this question is the subject of much debate in legal and political arenas. If chance is the driving force underlying the economics of poker, some states are considering the possibility of regulating―and thus legalizing―poker for the potential revenues it may generate. If poker is a game in which outcomes are dominated by skill, most states would lack the regulatory power over this multibillion dollar industry. This paper examines the factors affecting players’ returns on investments in poker and presents the results of an analysis of one billion hands of real online poker games
THE RELATIONSHIP BETWEEN THE REGULATORY ENVIRONMENT GOVERNING COMMERCIAL GAMBLING AND THE SHAPE OF THE MARKET IN THE SUPPLY AND GAME PARAMETERS OF GAMING MACHINES
Get PDFThis paper has three main purposes. The first sets the controls over the supply and the game parameters of gaming machines within the broader regulatory environment governing commercial gambling in Great Britain. This account notes the tensions that existed prior to the regime introduced by the Gambling Act 2005, but whose legacy continues to present both regulatory and commercial difficulties. Its second purpose is to indicate how these controls have shaped the gaming machine market and the debate around the ways in which the government could realise its policy of striking a balance between the interests of both operators and players. This paper does not address the regulation of online gambling; that is, ‘remote gambling’ by means of ‘remote communication’ (s. 4 of the Gambling Act 2005). Its third purpose is to provide a critical account of the regulatory regime governing the availability of gaming machines as the background against which the Responsible Gambling Trust’s other commissioned contextual papers may be read.The text falls into four sections:An overview of the regulation of machines under the Gaming Act 1968 and of the reasons underlying the structure of the new regimeA summary of the overall regulatory structure of the 2005 ActA descriptive account of the 2005 Act’s regulation of machinespreliminarycommon core definitional features of a ‘gaming machine’the categories of gaming machinesgaming machine licences and permitsconditions and standards for their use4.Some concluding comments on how these arrangements have shaped both the commercial availability of gaming machines and the debate about how the interests of operators and of players can be accommodate
Analyzing Information Efficiency in the Betting Market for Association Football League Winners
No full textSports betting markets have attracted a fair amount of research over the years. For association football, most of this research has focused on predicting the outcome of single matches and hence on the evaluating the efficiency of the match results betting markets. This paper presents a study on the betting market for league winners, a market that operates for almost a full year and therefore operates under different conditions than the relatively short-lived match results markets. Attempts are made to analyze both weak and semi-strong forms of information efficiency. Although the results are mixed, there are some indications that the market is inefficient with respect to both forms of information