Gaming Machines

Introduction | Utility of Games | Price Sensitivity | Denomination and Placement | Conclusion |

Lets explore this and bring a bit of mathematics into the argument.

It is a combination of many factors which serve to make one gaming machine more appealing than another, however from an economic rationalist perspective, price is a key factor in the choice of a gaming machine or any game of chance. Price is not simply the game hold or return to player level but incorporates a range of other factors. For example in a traditional gaming environment, comparisons are often made between Casino games using purely the house advantage as an indicator. Thus games such as “live” Keno with a hold of 25% to 30% are categorised as “bad bets” in comparison to games such as Craps which have a house advantage of 1.4% or lower. On a pure pricing basis such comparatives are clearly erroneous just as they are when referring to gaming machines.

This is because we have forgotten to include in our calculations factors such as decision rates in a comparable time frame, minimum bet requirements and the variance of a player’s result.

Comparing the games of Craps and Keno.

Taking into account the variance of a single game for each specific game type, it would be anticipated that 95% of the players actual results in a one hour time frame would fall in the following approximate range.

Thus in the purely economic rationalist terms of maximising profit or minimising loss, a player’s utility is maximised by playing Keno as opposed to Craps, even though a perfunctory comparison would indicate that Keno was a much worse bet.

Of course the decision of whether or not to gamble and which game to choose is generally not governed purely by economic rationalist views , and may also include such factors as an entertainment and excitement value “rating” which would push, for many players, Craps to the forefront.

I have used here an example from the non-gaming machine area because it aptly demonstrates a point which needs to be made. A comparison of gaming machine hold percentages alone is not a true indicator of “price”.

Factors which also need to be included are:-

i) minimum denomination
ii) hold percentage
iii) game speed
iv) hit frequency
v) game variance
vi) income

as well as many other subjective factors which determine appeal.