1. Win limits as a strategy for “responsible gaming” Stephen W. Litvin, Douglas M. Walker, and Russell Sobel 15 th International Conference on Gambling and Risk-Taking Caesars Palace, Las Vegas, May 30, 2013

2. Disordered gambling Gambling to an extent that it causes disruption in personal or professional life – Affects 1% of general population DSM-5 (2013) has 9 criteria, choose 4 (Petry et al., 2013) – Relies on other to provide money to relieve desperate financial situation caused by gambling Litvin, Walker, and Sobel, "Win limits..."2

3. Gambling research Focuses on… – Diagnosis – Causes and effects – Prevalence estimates – Treatment strategies Litvin, Walker, and Sobel, "Win limits..."3

4. “Responsible gaming” Strategies to help prevent and/or alleviate gambling disorders – Akin to limits for low-risk alcohol consumption (Currie et al. 2008) Optimal limits for “low risk participation” in gambling (Currie et al. 2006): – gambling no more than 2 or 3 times per month – spending no more than CAN$501-1000 per year on gambling – spending no more than 1% of gross family income on gambling No single, accepted definition of “responsible gaming” – “…any level of gambling that does not contribute to harm” (Currie et al. 2008) Litvin, Walker, and Sobel, "Win limits..."4

5. “Responsible gaming”, cont. Key aspects of responsible gaming include… – Setting a loss limit – Limiting the amount of gambling Time per session Frequency Focus on limiting losses and limiting time gambling – Financial losses cause problems – Negative expected value limiting time is important Litvin, Walker, and Sobel, "Win limits..."5

6. Promotion of “responsible gaming” Gambling research Corporate social responsibility (casino industry) State government laws and regulations Litvin, Walker, and Sobel, "Win limits..."6

7. Gambling research Motivation for “responsible gaming” – Disordered gamblers responsible for a significant proportion of industry revenues (Orford et al., 2013) – Financial problems characterize disordered gamblers – Public health focus on harm minimization (Korn & Shaffer, 1999) Responsible gaming in the literature – Often mentioned as a component of prevention & treatment – Tests of effectiveness? Litvin, Walker, and Sobel, "Win limits..."7

8. Corporate social responsibility Casino industry openly acknowledges problem gambling – May be a reaction to cigarette case CEOs’ claim that “nicotine is not addictive” 1998 settlement to pay states $206 billion Financial support of research – NCRG (National Center for Responsible Gaming) – Some critics of research (e.g., Schüll 2012, pp. 260-271) Casinos have brochures on responsible gaming placed in prominent locations on casino floor – “Set a budget and stick to it.” – “Set a time limit and stick to it.” The industry seems to be very upfront and responsible about informing customers – But does this also help their bottom lines? (Yes) Litvin, Walker, and Sobel, "Win limits..."8

9. AGA (2003) Four key characteristics of responsible gaming – Responsible gamers understand that gambling by its nature entails risk and that the odds of winning are with the house – Responsible gaming is done socially, with family, friends or colleagues – Responsible gaming is done for limited amounts of time, both in frequency and duration – Responsible gaming always has predetermined acceptable limits for losses Litvin, Walker, and Sobel, "Win limits..."9

10. State government Debates over casinos often focus on social costs and problem gambling – Politicians require industry to address problems and pay taxes to address them Regulations include… – Requiring brochures/information in casinos – Direct funding for treatment/help lines AGA summarizes state regulations (2008) Litvin, Walker, and Sobel, "Win limits..."10

11. Source: American Gaming Association, “Responsible gaming statutes and regulations.” (2008) Litvin, Walker, and Sobel, "Win limits..."11

12. Casino gambling statistics Players’ EV for casino games is -5% – Table games Roulette: single/double 0 Craps: odds (2x, 10x, etc.) – Slot machines Payout % often regulated Averages 95% Litvin, Walker, and Sobel, "Win limits..."12

13. Probability density function Source: Hannum & Cabot (2005, p. 22) Litvin, Walker, and Sobel, "Win limits..."13

14. A typical casino visit Loss limits are a key component of “responsible gaming” Consider a “responsible gambler” – Player starts with $500 chips and loss limit – Player leaves once they lose the budgeted $500 – Responsible gambler leaves all budgeted money at the casino – A “win limit” may have them leave earlier, with the casino’s money Litvin, Walker, and Sobel, "Win limits..."14

15. Win limits in the literature Never mentioned in academic literature Common in “how to beat the casino” books – Schneider, The Everything Casino Gambling Book: Feel Confident, Have Fun, and Win Big! (2004, pp. 214-15) “Setting limits on your winnings is just as important as setting limits on your losses, and for the same reason. Many a player has found himself up a huge amount at the table or slot machine, only to go home empty-handed because he continued to play well past the point where he should have quit. Remember, the longer you play any game at the casino, the more the odds swing in the casino’s favor.” Litvin, Walker, and Sobel, "Win limits..."15

16. Simulation of loss & win limits Slot machine – $1 per play, single line – Random number generator, 0.000-1.000 – Expected value of -0.05 Spin results and payoffs: Litvin, Walker, and Sobel, "Win limits..."16 Random NumberNet Payoff MinimumMaximum 0.000000.75000$ (1) 0.750010.90000$0 0.900010.97000$1 0.970010.99897$20 0.998980.99997$45 0.999981.00000$160 Overall expected value: $ (0.05)

17. Simulation, cont. – Player details Each run includes 900 players Each player can do 5,000 spins, if no limits set – Simulation Rules [1] No win limit or loss limit [2] Time limit of 1 hour (at 6 seconds per play = 600 plays) [3] $100 loss limit; no win limit [4] $100 loss limit; $100 win limit [5] $100 loss limit; $100 win limit “down” [6] $100 loss limit; $200 win limit [7] No loss limit; $100 win limit Litvin, Walker, and Sobel, "Win limits..."17

18. Simulation results summary (900 players) Simulation # Winners Average $ Result Maximum $ Result Minimum $ Result Average # Plays Maximum # Plays Minimum # Plays 1No win or loss limits (5,000 spins; 8.33 hrs. of play) 159$ (251)$ 419$ (843)5,000 2Time limit of 1 hr. (assume 6 sec./spin) 315$ (30)$ 233$ (220)600 3$100 loss limit; no win limit 66$ (76)$ 382$ (100)1,4295,000147 4$100 loss limit; $100 win limit 275$ (35)$ 162$ (100)6772,59578 5$100 loss limit; $100 win “down” 286$ (35)$ 666$ (100)7305,00041 6$100 loss limit; $200 win limit 135$ (53)$ 254$ (100)1,0844,478156 7No loss limit; $100 win limit 435$ (153)$ 186$ (858)3,1355,00081 Litvin, Walker, and Sobel, "Win limits..."18

19. Comparison -$100 loss limit vs -$100 loss limit; $100 win limit - losses cut in half, so is the fun - number of winners increases dramatically with win limits - cuts maximium in half (unless it’s win “down”) Litvin, Walker, and Sobel, "Win limits..."19

20. Litvin, Walker, and Sobel, "Win limits..."20 Probability Density Functions

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23. Litvin, Walker, and Sobel, "Win limits..."23 Cumulative Density Functions

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26. Win limits and “responsible gaming” Should this be a component? Suppose when a person reaches his win limit, he leaves the casino for an hour or two… – Thaler & Johnson (1990) discuss people behaving differently when betting with “house money” Event count is more important than magnitude Two wins of $50 each is “better” than one win of $100 – Leaving could change perception from “casino’s money” to his – The decision to stop gambling when ahead might be “good practice” for making other difficult decisions – like not gambling so much. Utility function weighting of… – more gambling sessions – greater chance of winning – less time playing The End. Litvin, Walker, and Sobel, "Win limits..."26

27. Contact information Doug Walker Dept. of Economics & Finance College of Charleston 66 George St. Charleston, SC 29424 dougwalker2@gmail.com walkerd.people.cofc.edu (843) 953-8192 Springer © 2013, 312 pages ISBN 978-1-4614-7122-6 www.springer.com Use Token for 20% off, before June 20 FSpjTscfCjJJqpX Litvin, Walker, and Sobel, "Win limits..."27