…and why you should think twice before playing them.

Originally published September 2021.

The gaming industry is big business in the US, contributing an estimated $240b to the economy each year, while generating $38b in tax revenues and supporting 17 million jobs. 

What people may not realise 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% 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.