GAMBLING BELIEFS VS. REALITY

GAMBLING BELIEFS VS. REALITY


Implications for Transformative Public Policy

June
Cotte

Ivey
Business
School

University
of Western
Ontario


Kathryn A. LaTour

William F. Harrah College of Hotel Administration

University of Nevada, Las Vegas

GROWTH AND CHANGING ATTITUDES

•
U.S. casino revenue is over $35 billion, and consumers lost
$138 million per day at casinos in 2007


•
Gambling is increasingly perceived to be simply another
form of leisure entertainment


•
Almost half of Americans agreed that “Internet gambling
should be permitted as long as it’s regulated by the
government”


TODAY’S TALK

•
Common misunderstandings, conventional wisdoms, and
beliefs about gambling


•
Some misconceptions are commonly held societal
perceptions, others are actually based on research that has
been inappropriately generalized


•
Outline beliefs and contrast to gambling realities; draw out
the public policy implications.

•
People are loss averse (
Kahneman

and
Tversky

1979)


•
More painful to give up a current asset than it is
pleasurable to buy that same asset (
Thaler

1980)


•
If either of these theories held in reality, casinos would not
be successful, as they rely on gamblers giving up current
assets (money) to engage in an risky activity

BELIEF 1:

CONSUMERS ARE LOSS AVERSE

PROSPECT THEORY AND GAMBLING

•
People in a “gain frame” should not risk money by
gambling… but they often do. Also suggests when gamblers
win they should stop gambling… but they often do not.


•
Gamblers should be deterred by the certainty of long
-
term
losses, but gamblers never know they will lose with
certainty on the next gamble, and the certain long
-
term
losses fail to deter them.


•
It may be that the gambling environment itself, the context,
reverses some of what we know from prospect theory.

PROSPECT THEORY VS. “REAL” GAMBLING

•
In PT studies, the risks are known for the decision maker. For
the gambler, the outcome is usually random.


•
In PT studies, a person chooses between two options. In a
casino the choices are almost limitless.


•
In PT studies, the person is not making a choice about
gambling their own money.


•
“While many experiments aim to understand risky choice, only
a small fraction explicitly links their results to real
-
world risk
taking
behavior
.” (Simmons and Novemsky 2008)

POLICY IMPLICATIONS OF BELIEF 1

•
Making consumers’ current gains/winnings salient should
increase risk aversion.


•
The environment of the casino itself distorts risk perceptions by
highlighting winnings (representativeness bias) BUT the large
numbers involved ($1,000,000 winners shown) likely work to
reduce perceptions of one’s own loses.


•
One implication would be a forced reduction of showing others’
wins
–

could helping gamblers focus on their own wins/losses.


BELIEF 2:

REAL BETS CREATE UNIQUE PHYSICAL REACTIONS

•
Gamblers’ heart rates increase in casino, but not in the lab


•
The correlation between size of bet and heart rate only
significant in casinos with real money


•
There is a negative correlation between the telic dominance
scale and the size of bets, but only in real casinos


•
Sensation seeking, combined with size of a bet, affects arousal
for real casino gamblers but not subjects in the lab


•
Playing for real money alters stress hormones and heart rate,
makes gamblers feel less tired for several hours afterward
–

even more pronounced for problem gamblers.


POLICY IMPLICATIONS OF BELIEF 2

•
Lab
-
based studies of hypothetical gambling should be
discouraged, because the environment, as well as real
monetary risk, create different reactions.


•
The physical reactions of real gamblers lead to more irrational
beliefs.


•
Policy efforts should focus on getting the gambler to physically
disengage from the environment (such as a cooling off period
online, or removing ATMs from the casino floor),


BELIEF 3:

PROBLEM GAMBLERS OFFER INSIGHTS FOR ALL

•
Much of the research on gambling has been on problem
gamblers.


•
We know little about the process of moving from recreational
usage to problem usage.


•
Motives for gambling among problem gamblers are much
stronger, and different, than those held by recreational
gamblers
-

should concern those who use the literature
generated on problem gamblers to inform the study of
recreational gambling.

POLICY IMPLICATIONS OF BELIEF 3



•
Do not only fund studies

of pathological
gambling, but begin to
look a recreational gambling (everyone starts somewhere).


•
Focus on research that allows casinos (online and off) to
identify observable
behaviors

that warrant intervention.


•
Direct

research and interventions at the triggers for
the
transition from recreational to problem gamblers.

BELIEF 4:

GAMBLERS CHASE LOSSES

•
The decision to chase losses looks similar, at a neural level, to
craving for a drug among addicts.


•
The perception that gamblers chase losses is in part a
misconception, because gamblers do not often do this.


•
The anecdotal phenomenon of chasing losses might be more
prevalent in a lab.


•
A longitudinal study of real online gamblers showed they
gradually became less likely to chase losses
.

POLICY IMPLICATIONS OF BELIEF 4




•
Research on the “break
-
point” where gamblers shift from risk
-
seeking to risk
-
averse


•
Gamblers typically lose the most money when loss
-
chasing, so
we need to understand what triggers this.
On regulated online
sites, we should be able to design the software to flag this
point.

BELIEF 5:

NEAR MISSES MOTIVATE GAMBLERS TO CONTINUE

•
Near misses: not constantly losing but constantly nearly
winning
-

increases intention to continue and time spent
gambling


•
In North America, casinos are allowed to create perception of
more near misses than is statistically likely


•
Real near misses recruit the win areas of the brain, which is
why they promote more gambling play.

POLICY IMPLICATIONS OF BELIEF 5




•
Research shows that near
-
misses are less pleasant but far
more motivating (entrapment?)


•
The effects of near misses are more extreme for those
gamblers who erroneously feel they have more control.



•
Many countries do not allow the
clusterin
g

algorithm that
creates near
-
misses
–

could agitate for regulatory changes in
Canada and the U.S.


BELIEF 6:

TEACHING PROBABILITY REDUCES GAMBLING

•
Gambler’s fallacy
: belief in a negative autocorrelation when
random
-

some correspondence between lab and casino
-
based
research.


•
Hot hand
: belief in positive autocorrelation when random
-

lab
studies show this, but field evidence shows sports bets and
lottery sales are weaker after wins. For some casino table
games, more evidence of hot hands beliefs.



POLICY IMPLICATIONS OF BELIEF 6



•
Might conclude that teaching gamblers about the laws of
probability and small samples would reduce these irrational
behaviours, but not the case.


•
Education about gambling odds may improve consumers’
overall knowledge, but that knowledge is not activated or
used in a casino setting.


•
Conclusion: education about the stats of gambling is likely
wasted effort.

BELIEF 7:

RESPONSIBLE GAMBLING CAN BE PROMOTED


•
“Please gamble responsibly” makes little sense without a
definition of what responsible gambling would look like


•
The truth is many responsible gambling interventions come too
late


•
Although not all gamblers who begin gambling as teenagers
become problem gamblers, most adult problem gamblers
began their gambling as teenagers


POLICY IMPLICATIONS OF BELIEF 7




•
Education about the potential problems of gambling needs
to come early, such as through schools or parents.



•
A focus on family interventions would

also address

the
normalization
that occurs when children grow up with gambling
parents.



•
This

will become more important as access increases via
online, and gambling becomes a more “normal” leisure pursuit.

BELIEF 8:

ONLY BAD PEOPLE ARE PROBLEM GAMBLERS

•
Greater availability to gambling opportunities is a key risk factor
for problematic gambling.


•
The chance of being a problem gambler, as opposed to never
having tried gambling, increases 39% for each additional type
of legal gambling available in one’s home state.


•
Problem gambling percentages are much higher for Internet
gamblers.



POLICY IMPLICATIONS OF BELIEF 8


•
Horse is out of the barn, so to speak
–

prohibition won’t work.
So…

•
Education could focus on making people aware that literally
anyone can develop a problem.

•
Walk the

line between offering online games, but cautiously


•
Brewing concern: the advertising of online gambling (that will
likely accompany the launch) could trigger craving. Access is
instantaneous. We ban ads for cigarettes and liquor
–

why not
online gambling?

BELIEF 9:

THERE ARE NO UPSIDES TO GAMBLING

•
Taxes on gambling help fund education


•
Casinos provide employment


•
Casinos provide a venue for social connections


WHERE TO FROM HERE?

•
Research Methodologies
–

lab vs. field


•
Gambling Populations
–

problem vs. recreational


•
The Online “Frontier”
–

unique aspects,
regulatory vacuum