Letting It Ride: The Effect of the Economy on Slots to Table Game Ratios

In recent years, casinos have been a favorite solution by state governments to gain revenue. But just how do casinos keep their revenues out of the red in times of economic hardship? A casino’s main source of revenue comes from slots and table games, and number of slot machines and table games is frequently adjusted in casinos. This paper examines the extent to which casinos alter the balance of slot machines and table games in response to the national economic performance. Little research has been conducted examining this specific aspect of the business of casinos. Understanding this relationship could be helpful in implementing tax policies on the casino industry to better ensure stable tax revenues. Data were collected on casinos at the county level on a quarterly basis from 2004-2014. Several economic measures were used: US median weekly earnings, US housing index, and US unemployment. SUR regressions of these measures on the ratio of slots to table games, including control variables, were run on Gretl software. Economic factors likely affected the income elasticity of gamblers, especially during periods of economic recession. Casinos are responsive to these risk preference changes, as evidenced by this analysis.Undergraduate Research AwardUndergraduate Research ScholarshipNo embargoAcademic Major: Economic