Baccarat - 5% commission

I wonder who can help,

I understand how to calculate probability, HE, SD and Variance for all 3 bet types on Baccarat. (Banker, Player and Tie).

I remember reading somewhere that there is a calculation that is used by the casinos to calculate how much vig to charge. Why 5%, why 4%? I aslo know how the charging of less vig will effect the HE negatively (from the houses' persepctive) and charging more vig would positively effect the game HE.

Is there a mathematical calculation to calculate how much vig should be charged on any table game in the casino, specifically Baccarat?

Has it just always been 5% because that is what the vig in a casino is?

Thanks

The easy answer to this question is that all a vig is (with respect to a table game) is a mechanism by which the casino pays the result at less than true odds. For an example of what I mean, you could look at the Place to Lose 6/8 bets on Craps, typically, these bets pay 4:5, however, it could also be said (I know, this example is ridiculous) that I am paying you Even Money but taking a 20% commission out of the win only...IOW, paying you 4:5. Winning banker bets pay 19:20, same as a 5% commission.

Casinos may charge less than 5% if they so choose, and The D in Downtown Las Vegas presently does (though it could be changing) as they charge 4%.

Can you please explain what you mean by, "Calculate how much vig should be charged?" Casinos charge whatever amount of vig that they want to which is going to be a function of how much they want to hold and what kind of games they are competing with. You basically just figure out the true odds and then determine how much you want to short pay that by.

I would say that 5% is popular, when possible, because it is easy to deal with mathematically.

4% probably works for The D, as well, in the case of Baccarat. You just shave $1 for every $25 bet anytime Banker wins.

Quote: Mission146

The easy answer to this question is that all a vig is (with respect to a table game) is a mechanism by which the casino pays the result at less than true odds. For an example of what I mean, you could look at the Place to Lose 6/8 bets on Craps, typically, these bets pay 4:5, however, it could also be said (I know, this example is ridiculous) that I am paying you Even Money but taking a 20% commission out of the win only...IOW, paying you 4:5. Winning banker bets pay 19:20, same as a 5% commission.

Casinos may charge less than 5% if they so choose, and The D in Downtown Las Vegas presently does (though it could be changing) as they charge 4%.

Can you please explain what you mean by, "Calculate how much vig should be charged?" Casinos charge whatever amount of vig that they want to which is going to be a function of how much they want to hold and what kind of games they are competing with. You basically just figure out the true odds and then determine how much you want to short pay that by.

I would say that 5% is popular, when possible, because it is easy to deal with mathematically.

4% probably works for The D, as well, in the case of Baccarat. You just shave $1 for every $25 bet anytime Banker wins.

Thanks Mission,

The only reason I ask is that my colleague tells me that during his studies at UNLV he had a professor who showed them a forumla on how the casinos calculate vig.....he also told me that it looked similar to the EV calculation, i.e: (NetPayi)(EV) + (NetPayi)(EV) + (NetPayi)(EV)

I told him that in my opinion the only way to calculate what vig to use is with simulation, work out 10% all the way down to 1%, see what effect each has on HE and choose the correct one for your business.

I thoguht I would ask the learned members of this forum as I came up with jack :)

I'm not sure what formula that refers to, but it looks pretty close to a formula I have seen used to determine Standard Deviation.

The Standard Deviation is an important concept in casino games because casinos are generally going to have a higher overall hold in games in which there is greater Variance. For example, if you have a slot machine in which the base jackpot is $1,000,000 and a Maximum bet is $2.00, then that is a potential win of 500,000x the amount of the bet. The casino is going to compensate for that somewhere and that somewhere is in the House Edge.

Craps is a game, with a Pass Line bet, for example, that does not need to have a high House Edge because it has much lower Variance (read: swings) and the pay on the Pass Line is Even Money while it offers a low House Edge.

There are at least two ways you can adjust the House Edge on the game, there is, "Calculating the vig," as you put it, while keeping the probability of a certain result the same (ex. Baccarat-Banker) or there is simply changing the probability of a win. Let's use the Pass Line at Craps as an example:

Craps, Charging a Vig (Short-Paying)-Pass Line

Okay, for Craps, Pass Line, let's say I wanted to have a higher House Edge, I could accomplish this by charging a vig on every win of 5% (call it $1 per $20 bet) and make the minimum bet $20 for simplicity, while keeping the probability of success the same or I could simply pay 19:20 on a win. It's the same exact thing.

(.4929 * 20) - (.5071 * 20) = -0.284---.284/20 = 0.0142 (Pass Line HE is actually 1.41%, rounding)

(.4929 * 19) - (.5071 * 20) = -0.7769---.7769/20 = 0.038845 (New House Edge 3.885%)

As you can see, by implementing this new short pay, I have changed the House Edge on the Pass Line from 1.41% to 3.885%, if I were to require a 10% commission (or pay 9:10, again, same thing):

(.4929 * 9) - (.5071 * 10) = -0.6349---.6349/10 = 0.06349 (New House Edge is 6.35%)

The case can become as extreme as you want it to be, here is a 90% commission on the win, or a win paying 1:10, same thing:

(.4929 * 1) - (.5071 * 10) = -4.5781---4.5781/10 = .45781 (New House Edge is 45.78%)

Craps Probability Change-Pass Line

The other way to change the House Edge on the Pass Line would be to simply have it continue to pay Even Money, but make a winning result even less likely. The change that seems the most obvious to me is to change a Yo on the CO from a winning result into a losing one, which would have the following effect:

Seven Winner: 1/6 = .1667

CO Craps (Includes Yo) = 1/6 = -.1667

CO "4 or 10", Winner: (3/36 * 3/9) = 0.02777777777 * 2 = .05555555554

CO "5 or 9," Winner: (4/36 * 4/10) = 0.04444444444 * 2 = 0.08888888888

CO, "6 or 8," Winner: (5/36 * 5/11) = 0.06313131313 * 2 = 0.12626262626

CO, "4 or 10," Loser: (3/36 * 6/9) = 0.05555555555 * 2 = 0.1111111111

CO, "5 or 9," Loser: (4/36 * 6/10) = 0.06666666666 * 2 = 0.13333333333

CO, "6 or 8," Loser: (5/36 * 6/11) = 0.07575757575 * 2 = 0.15151515151

Probability-WIN: .1667 + .05555555554 + 0.08888888888 + 0.12626262626 = 0.43740707068

Probability-LOSS: .1667 + 0.1111111111 + 0.13333333333 + 0.15151515151 = 0.56265959594

For a $5 bet:

(0.43740707068 * 5) - (0.56265959594 * 5) = -0.6262626263----0.6262626263/5 = 0.12525252526 (House Edge 12.53%)

That'd be a cool side bet with zero juice, "Come Out Seven," bet. It would pay Even Money and would be for the CO roll only, or you could also make it when making a Come bet. The bet could not exceed your Pass (or Come) bet in amount and would win Even Money if the CO is a Seven losing on a CO of any Crap number or Yo and pushing on any point number.

Quote: Mission146

The easy answer to this question is that all a vig is (with respect to a table game) is a mechanism by which the casino pays the result at less than true odds. For an example of what I mean, you could look at the Place to Lose 6/8 bets on Craps, typically, these bets pay 4:5, however, it could also be said (I know, this example is ridiculous) that I am paying you Even Money but taking a 20% commission out of the win only...IOW, paying you 4:5. Winning banker bets pay 19:20, same as a 5% commission.

The situations are slightly different.

On Buy bets in craps, they are charging you commission on a bet that would otherwise have no house edge.
On a banker bet in Baccarat, they are charging you commission on a bet that would otherwise have a player edge!
In other games (eg, Pai Gow Poker where the house is banking) they charge you a commission on a bet that already has a house edge!

So, in craps, they could lower the commission on buy bets as much as they wanted.
In baccarat, they can only lower it so much before the player has an edge.
In PGP, they could eliminate it altogether (at least when the house is banking) and still make money (though, perhaps not enough)

I think that they use 5% because it's really easy to calculate, and people don't feel like it's too much of a ripoff, and it requires change no smaller than quarters for bets that are multiples of red chips.

Quote: AxiomOfChoice

The situations are slightly different.

On Buy bets in craps, they are charging you commission on a bet that would otherwise have no house edge.
On a banker bet in Baccarat, they are charging you commission on a bet that would otherwise have a player edge!
In other games (eg, Pai Gow Poker where the house is banking) they charge you a commission on a bet that already has a house edge!

They are slightly different, but conceptually the same. My point is, in Baccarat, the casino would still be correct in paying less than Even Money (though you'd be getting into the pennies if we went with exactly a 0% HE bet). The Pai-Gow Poker example is conceptually different because that already has a House Edge, so even money would still be paying less than true odds. My overall point is that it is a mechanism by which worse than true odds are paid.

Thanks guys, I appreciate the detailed reply Mission.

I have quite a bit of practical casino experience with calculating HE, Var, SD, probability and so on. I also have a very good handle on what effects SD and Var has on each game.
That is why, when I heard this question from my colleague I was more than a little stumped to say the very least. I have never given any consideration that there may be a formula for calculating what the vig "should" be on a particular game. As mentioned I know how to calculate HE taking the vig into account but not how the casinos arrive at 5%.

My initial answer to my colleague was that, "the vig has always been 5%". I also told him about what effect the vig would have at 4% on the HE. He seemed to understand but was adamant about his college professor showing him a formula.....

Personally I think he may have misunderstood as English is not his first language or I'm missing an important part of the story that I'm not relaying!

Thanks again!

Quote: AxiomOfChoice

The situations are slightly different.

On Buy bets in craps, they are charging you commission on a bet that would otherwise have no house edge.
On a banker bet in Baccarat, they are charging you commission on a bet that would otherwise have a player edge!
In other games (eg, Pai Gow Poker where the house is banking) they charge you a commission on a bet that already has a house edge!

So, in craps, they could lower the commission on buy bets as much as they wanted.
In baccarat, they can only lower it so much before the player has an edge.
In PGP, they could eliminate it altogether (at least when the house is banking) and still make money (though, perhaps not enough)

I think that they use 5% because it's really easy to calculate, and people don't feel like it's too much of a ripoff, and it requires change no smaller than quarters for bets that are multiples of red chips.

Thats a very good answer, but why the hell does PGP have a $25 minimum instead of $20???

The way I learned it, vigorish is a fee or percentage applied to any proposition that gives the "House" an advantage that ordinarily does not exist. In those terms, Baccarat 5% is a vigorish, and PGP is not, Buying the 4 or 10 would be a vigorish, as 2:1 has no House advantage.

Quote: 98Clubs

Thats a very good answer, but why the hell does PGP have a $25 minimum instead of $20???

The way I learned it, vigorish is a fee or percentage applied to any proposition that gives the "House" an advantage that ordinarily does not exist. In those terms, Baccarat 5% is a vigorish, and PGP is not, Buying the 4 or 10 would be a vigorish, as 2:1 has no House advantage.

What about a sports bet? Is laying -110 not considered vigorish then? Assuming the line is fair.

Sure it is Fair is -100.

Delete. Misread post.

Quote: 98Clubs

Thats a very good answer, but why the hell does PGP have a $25 minimum instead of $20???

I've seen it at different limits. I've definitely seen $10 tables, and I've definitely seen $100 tables.

$20 is a strange minimum for a table. For some reason, I've never seen it at any game. I have seen $1, $3, $5, $10, $15, $25, $50, $100, $200, $300, and $500, but never $20.

Personally, I think that $20 is more natural than $15 (especially for something like blackjack where there are 3:2 payoffs) but I've never seen it. (I will usually cap odd-valued bets, like $25 or $75, with a red chip, specifically because I don't want to deal with change)

I recently played at the seminole hard rock near ft lauderdale...they had 20 dollar min's for paigow and bacc. First time I ever saw that.

My understanding of "vigorish" is always the difference between what a theoretical charitable enterprise would pay versus what an actual loan shark would charge you.

So its always what the true mathematical odds are for the event to take place in the theoretical world less the actual payout in the real world that will be paid if you happen to win. So its difference between a theoretical banker who charges zero percent interest on a loan versus the real world Banker with a vowel on the end of his name who employs a "leg-breaker" named No-Neck Louis from Cleveland.

I think Borgata in AC sometimes has $20 tables for baccarat (can gr8player verify?), and they even have $20 cheques.

Quote: wudged

I think Borgata in AC sometimes has $20 tables for baccarat (can gr8player verify?), and they even have $20 cheques.

$20 cheques are an abomination before the lord of dealer cheque-handling skills!!! :)
I understand the math, but it ruins the presentation :(

Quote: wudged

I think Borgata in AC sometimes has $20 tables for baccarat (can gr8player verify?), and they even have $20 cheques.

Sure thing, wudged.

The Borgata utilizes yellow-colored chips in $20 denomination solely for use at their Bac games. They do so in order to make charging the 5% commish as easy a task for the dealers as they can make it. They do not even have the green-colored $25 denomination chips available at their Bac games.

Obviously, that makes their minimum game a $20 game as opposed to the much more standard $25 game, as well.

Hope this helps.

Oh, and I agree with you, Scooter77, I can't stand those $20 yellows either. But I do enjoy their EZ bac games, so Borgata it is for me.