How Changes in the House Advantages of Reel Slots Affect Game Performance

Abstract

In two-game pairings of otherwise identical reel slot machines, the games with greater pars outperformed those with lesser pars. This finding held across five pairings, three casinos, three gaming markets, three game titles, three differences in pars, and five bank locations. These findings help clarify an important and polarizing issue within the literature and among casino operators. Many believe that increasing pars would be perceived as increasing prices, potentially driving customers to competitors. This concern takes on an exaggerated importance for operators catering to a frequently visiting, highly involved clientele. Over time, many believe such players would detect the increased pars, leading to an unwanted exodus of play. To the contrary, the findings did not support the ability of players to detect even egregious increases in the pars, suggesting a considerable insensitivity to changes in the obfuscated price. With pay tables featuring identical awards, there was no rational justification for playing the games with the greater pars. In spite of this clear disincentive, the games with the greater pars produced more theoretical win than their paired counterparts in each of five, two-game pairings. This suggested that an opportunity to increase operating profits may be available to those willing to buck conventional wisdom.

Pushing the Limits of Increased Casino Advantage on Slots: An Examination of Performance Effects and Customer Reactions

“…Without naming it expressly, many have argued that the law of demand can be applied to reel slot play, holding that gamblers eventually detect the par (price) and subsequently decrease play on the high-par games (Frank, 2017; Gallaway, 2014; Legato, 2015, 2019; Meczka, 2017). To the contrary, the price shocks in previous research of a similar design have not produced support for the law of demand (Lucas, 2019; Lucas & Brandmeir, 2005; Lucas & Spilde, 2019a, 2019b). Furthermore, at the level of the clientele, the responses to these previous price shocks would not be considered rational, within the context of the generalized axiom of revealed preference (i.e., GARP).…”

“…Other studies that have featured paired designs have found increases in the pars of low-denomination games to be associated with significant increases in T-win (Lucas, 2019; Lucas & Spilde, 2019a, 2019b). These increases were also economically significant, ranging from 48.66% to 236.45% above the T-win levels produced by the low-par games.…”

“…It is the most meaningful performance metric, as T-win embodies both wagering volume and the casino advantage levied on the wagers. However, operators may be wary of short-term gains in T-win at the expense of lost play in the longer term (Frank, 2017; Lucas & Spilde, 2019b). Alternatively stated, many would pass on short-term increases in T-win if they believed that players could eventually perceive the increased pars that produced them.…”

“…Three studies have examined play migration within paired reel slot machines (Lucas, 2019; Lucas & Spilde, 2019a, 2019b). Their findings failed to support the detection of par differences up to 8.9 percentage points.…”

“…Unlike video poker and most electronic table games, par is concealed from reel slot players, inhibiting our understanding of its short- and long-term effects on revenue. For instance, previous findings have questioned the existing paradigm of player sensitivity to reel pars (Lucas, 2019; Lucas & Brandmeir, 2005; Lucas & Spilde, 2019a, 2019b). Contrary to the inveterate wisdom of the industry, these studies found high-par games to produce greater revenue, while failing to provide evidence of play migration, that is, price sensitivity.…”