What is the "right" house advantage?

It's friday so another comment for thought and discussion.

We all know except for free odds in craps every bet in the casino has a built-in house advantage. Lets compare it to a tax you pay to play. In income taxes there is the "Laffer Curve" which states that at 0% and 100% taxes will be "0" since at 0% you will collect nothing and at 100% no one would work. But somewhere in the middle is the "best" rate that lets the government collect the most by getting the taxpayer the most motivated to earn.

So correlate that to a casino. If you set your slots at the minimum payout, say 75%, serious players will not play since they will lose very fast. Set them at 99.9% and you need lots of play to keep the lights on. This can correlate to any game.

So, what do you all think is the "right" house advantage?

Good question. For a table game, you have to pay the casino worker and the support staff (pit, table games supervisor, security, licensing the game) so you need to have a profit that will support the game being there, say, about $50/hour. A $10 blackjack table that is 1/2 full will generate about .015 x $30 x 100 = $45 / hour. For the carnival games, I think a 2 to 4% HA is appropriate because the hands per hour are less. Roulette has a 5.26% HA at $10 because you simply can't generate that many spins per hour.

For a slot machine, you need to pay the slot machine cost and the slot attendant. Cost is much lower but the slot machine is in place for 24 hours a day. The casino also needs to generate profits for its shareholders in order to keep their CEOs and board members fat. Personally, for a slot machine, I would happily run a quarter slot machine with a 1% House Advantage, but that doesn't generate enough for the casino.

Most slot machine players really don't know any better. You see the penny and nickel slot players (who bet usually at least $.50 per pull) run against a 11% advantage, which I think is really not fair to the players. At a nickel per pull for the casino and running about 12 pulls a minute, you are looking at $36/hour for the casino while the game is in play. I think that it too high for a machine.

My personal feeling is that a 5% HA for a slot machine is appropriate. It gives the casino enough money and it gives the player a fighting chance to prolong their experience without breaking their bank.

Perhaps it is "right" for the casino to charge whatever the traffic will bear? Since many of the players are ignorant of house advantage and resigned to such ignorance perhaps the right HA is even higher? Since many players are there for the equivalent of a fix rather than entertainment is a premium economically acceptable? Airlines charge more for late sales and do not want a fixed priced ticket structure, so should a casino adhere to the same philosophy or adopt a policy of all slot machines have one Hold figure.

Casinos like to have a mix of games available to satisfy transitory whims but I don't think the casino ever thinks that decisions are made by players on the basis of house edge. Social pressure, whims, existing knowledge all play a role in game selection by the player. Is a casino entitled to a premium on the house edge simply because most players will succumb to group pressure in game selection rather than make decisions based upon house advantage?

Do Casinos compete with other casinos or with the bowling alley? The most tax revenue will be raised by getting the players out of the casino and getting them to foolishly buy lottery tickets.

When considering the games out there and how people like to play them- Id say the cut off point for people who consider the HA on games is around 2.5 to 3 percent- after this area it starts to look unfavorable enough that you loose an unfavoable amount of players to other games (OR WORSE CASINOS!)


This same question has intreagued me from the viewpoint of a casino owner. For example- What could I do to Let it ride to make it bring in more players who think the game is too difficult?- What if I make 9's and better the rule... maybe even 8's and better how many more hands will they win with 8's and 9's added and thus lower the high house edge a little bit and get the table fuller. What if I add pair plus to the let it ride table.

And on the reverse.. too many people are playing blackjack and while itsnice tohave a full time, I got tables with minimums with standing room waiting lines! Maybe I can make blackjack less favorable to some player such as 6:5 BJ payout instead of 3:2 or make the table H17 for the dealer- get the odds less favorable.. the ones that wull play will stay and play, but it mgiht get rid of just enouhg players so that I dont have lines- maybe these that dont want to wait in line will pass by the tables that all the sudden seem better odds (let it ride with 8's and better)

Its a very interesting project to play with and its a hard line to find. But a key source for this information is how many of the patrons are even going to notice or care about the HA in the first place.

It's virtually an impossible question to answer since obviously people will tolerate a much larger HA in slots because of the possibility of a jackpot. The Megabucks machines are the most profitable ones in Vegas.

The machines are much tighter in Pennsylvania, because the closest casino is always a minimum of 50 miles away. Slots in PA are similar to lottery tickets in that the state keeps about half the money. In exchange for this immunity from competition the machines are set to a higher HA.

In light of the 28 month plunge in blackjack revenue in Nevada, I think that the casinos should mutually agree to offer the same liberal rules for a table with a $25 minimum. There should be a logo so that the player knows he is playing at the best rules. Blackjack has plunged more than any other type of game (sports, race, most pit games, slots). Some of this drop is related to player distrust of the casino because of so many rules that benefit the casino.

Despite the anger, even the worst blackjack game is rarely as bad as a typical slot machine.

Personally, I see nothing wrong with a huge house advantage (10%-15%) on side bets that have very high payouts (175:1 or 400:1). I think that the casino is entitled to a premium if they are going to offer games with such volatility.

I was watching a young woman at the Golden Nugget the other day. She was playing a Big Wheel game (possibly the worst game in the casino with HA advantage of up to 20%). But she was beaming with happiness. She said she could stay there all day. I showed her husband how to play pass/don't pass bets in craps. This same young woman was panic stricken at her husband playing a game with 1.41% HA. I mean the games are supposed to be entertaining. Not everyone is going to learn the mathematics.

Quote: pacomartin

It's virtually an impossible question to answer since obviously people will tolerate a much larger HA in slots because of the possibility of a jackpot. The Megabucks machines are the most profitable ones in Vegas.

The machines are much tighter in Pennsylvania, because the closest casino is always a minimum of 50 miles away. Slots in PA are similar to lottery tickets in that the state keeps about half the money. In exchange for this immunity from competition the machines are set to a higher HA.

I think PA actually takes 55% of the slot revenue, but yes, it is at least 50%. As I have said before, the mafia only skimmed 33% off the slots in the Stardust back in the day. Kind of makes you wonder who the bigger crooks are.

Quote: Malaru

When considering the games out there and how people like to play them- Id say the cut off point for people who consider the HA on games is around 2.5 to 3 percent- after this area it starts to look unfavorable enough that you loose an unfavoable amount of players to other games (OR WORSE CASINOS!)


This same question has intreagued me from the viewpoint of a casino owner. For example- What could I do to Let it ride to make it bring in more players who think the game is too difficult?- What if I make 9's and better the rule... maybe even 8's and better how many more hands will they win with 8's and 9's added and thus lower the high house edge a little bit and get the table fuller. What if I add pair plus to the let it ride table.

And on the reverse.. too many people are playing blackjack and while itsnice tohave a full time, I got tables with minimums with standing room waiting lines! Maybe I can make blackjack less favorable to some player such as 6:5 BJ payout instead of 3:2 or make the table H17 for the dealer- get the odds less favorable.. the ones that wull play will stay and play, but it mgiht get rid of just enouhg players so that I dont have lines- maybe these that dont want to wait in line will pass by the tables that all the sudden seem better odds (let it ride with 8's and better)

Its a very interesting project to play with and its a hard line to find. But a key source for this information is how many of the patrons are even going to notice or care about the HA in the first place.

Based upone the prevelance of 6:5 tables in Vegas, I think your answer to your last question is that most people have no clue about HA. If they did, the first 6:5 table ever set up would have been gone within a few months as it would have been empty.

Quote: AZDuffman

I think PA actually takes 55% of the slot revenue, but yes, it is at least 50%. As I have said before, the mafia only skimmed 33% off the slots in the Stardust back in the day. Kind of makes you wonder who the bigger crooks are.

It's an observation that I've made several times. Legal thievery can be much worse than illegal thievery.

Quote: ruascott

Based upone the prevelance of 6:5 tables in Vegas, I think your answer to your last question is that most people have no clue about HA. If they did, the first 6:5 table ever set up would have been gone within a few months as it would have been empty.

I agree most people wouldn't know the house advantage if it bit them on the nose (which I believe it tends to do anyway). But the prevalence of 6:5 tables may, and I stress may, be a cause in the decline of Blackjack in Vegas.

For one thing older players would know it used to be 3:2 and that 6:5 is less advantageous for them. For another lots of Vegas-related sites disparage the 6:5 mercilessly. In my first trip to Vegas I didn't plan to gamble much, so I left without doing much research on gambling, but even so when I saw the "BJ pays 6:5" rule pritned on the table, I thought to myself "That's not right."

This would be a good time for an innovative casino to roll out 6:4 BJ (assuming I'm not making an ass out of myself right now, but isn't 6:4=(3:2)*2, which is to say an equal ratio?). Hell, any casino to offer "High limit rules at low limit tables" might just clean up handsomely. I wish some casino would. It'd be the easiest ad campaign ever.

Quote: AZDuffman

It's friday so another comment for thought and discussion.

We all know except for free odds in craps every bet in the casino has a built-in house advantage. Lets compare it to a tax you pay to play. In income taxes there is the "Laffer Curve" which states that at 0% and 100% taxes will be "0" since at 0% you will collect nothing and at 100% no one would work. But somewhere in the middle is the "best" rate that lets the government collect the most by getting the taxpayer the most motivated to earn.

So correlate that to a casino. If you set your slots at the minimum payout, say 75%, serious players will not play since they will lose very fast. Set them at 99.9% and you need lots of play to keep the lights on. This can correlate to any game.

So, what do you all think is the "right" house advantage?

I would say anything around .5% HA on even money and 1-2% for something higher. Single zero roulette is on the high end of what I would feel comfortable playing for extended periods (for more than 1:1 bets). This if fine for bets under 25-50, higher limits really should be lower. But yes, in reality, I'm willing to make 2% even money bets so yeah.

The M Resort offered some real good deals when it first opened, but I think they got bit by a lucky roulette player and a team of dice cheats and some players that hogged VP machines, so they adjusted things fairly soon.

These casinos do have bills to pay. That gorgeous waitress half in and half out of a skimpy uniform may live on tips but the booze she serves they have to buy.

I really wonder if people object to six to five blackjack but then go play slots instead? I know one slot player who still thinks those player club cards affect your winnings and that its less likely to win on a free play.

So how many gamblers really notice what game they are playing. And if its in a Party Pit how many men are ever going to notice? Look at all those casinos who blazon their marquee with 6:5... darn few even know. I once played at a Dealer Hits Soft 17 table for two hours before I noticed it.

A majority of gamblers know nothing about house edge nor do they care. I was at the variety store last night and this young man (20s) was buying some smokes. He was telling the clerk that "I don't play slots anymore, I play roulette. I clean up there". Uh huh. Ontario only has 00 roulette.

That said, the casino has to cater to both. In the 6:5 blackjack, they've discovered a breed of players who don't understand the game who are willing to play because the limits are lower and they don't know how to play.

A 6:5 blackjack game at 1.78% is not much better than a quarter slot machine when you consider the amount played.

$10 6:5 blackjack at 100 hands an hour will cost you about $17.80.
$.25 slots, 3 line at 360 pulls an hour at 7% HA will cost you about $18.90

Quote: boymimbo

$10 6:5 blackjack at 100 hands an hour will cost you about $17.80.
$.25 slots, 3 line at 360 pulls an hour at 7% HA will cost you about $18.90

I think that the people who are happy playing 6:5 blackjack do not know or want to know Basic Strategy and therefore an hour will cost them far more than the theoretical result.

I wonder how often that guy who is "cleaning up" at a 5.26 percent House Edge game has to go to the ATM to obtain more cleaning supplies?

I have said before that I think that 5.26% is a reasonable price to pay for 36:1 jackpots. The way I figure it you pay a much higher percentage in craps and in slots for those kind of jackpots.

You are an idiot if you are playing red/black. You should just walk over to the craps table or play any varation of blackjack. Personally I wouldn't play an even money bet unless the HA is 1.5% or lower.


So in my opinion, the right HA depends on the jackpot. Some of these sidebets that pay 200:1 or 400:1 deserve their 12% HA. I don't begrudge the casino wanting a higher HA for a big jackpot.

A lot of people are not excited by even money bets.

Quote: pacomartin

A lot of people are not excited by even money bets.

True. I've heard the expression: The less you bet the more you lose every time that you win.
There is a certain advantage to being bold and going for a substantial payout. I don't know anyone who buys a lottery ticket and dreams of a 100.00 win!

I kind of disagree. You can get 800:1 jackpots without risking a heck of alot of house advantage on Video Poker. You can get 30:1 and 40:1 jackpots on 3 card poker while retaining the house edge under 3% (for full pay 3-card). Certainly you get the jackpots less frequently than you do in Roulette. On the other hand, how many gamblers who play roulette bet on one number? Chances are that they bet a range of numbers to meet the minimum bet and bet all of those numbers to win $35.

Quote: pacomartin

So in my opinion, the right HA depends on the jackpot. Some of these sidebets that pay 200:1 or 400:1 deserve their 12% HA. I don't begrudge the casino wanting a higher HA for a big jackpot.

I tend to agree with you pacomartin. You might find this article interesting, i know I did!
http://krigman.casinocitytimes.com/article/use-even-money-equivalents-to-compare-bets-5458

Quote: DrEntropy

You might find this article interesting

he stumps me with "the same nominal bet at video poker has the effect of four times as much at blackjack" . What does he mean by that?

Quote: odiousgambit

he stumps me with "the same nominal bet at video poker has the effect of four times as much at blackjack" . What does he mean by that?

He means in terms of variance-- $1.25 bet at video poker has about the same variance* as a $5 blackjack wager. If the rules of the blackjack game had a 0.5% house edge and you were playing a crappy VP machine with a 2% house edge (found in airports and gas stations) you would find that after a given (and large enough) number of decisions the over all effect on your bankroll would be about the same. [IMHO you should really compare for a fixed # of hours, but whateva]

* Note this really depends on the particular VP games, some are much higher variance.

I'm glad this thread was revived because I've been thinking about it. The main factor is how long it takes to resolve a bet... Blackjack is a good game because although you can go through 70-90 hands per hour you can usually live on a .5% HA for us smart people. On the other hand, I enjoy sports bets with anywhere from a HA from 10-30% because it will last me 2-3 hours. (This is my new secret to Vegas for people with a low bankroll, just sit in the sports books all day assuming you like sports)

Quote: ahiromu

...just sit in the sports books all day assuming you like sports)

I have noticed you are not alone in this

Quote: pacomartin

I have said before that I think that 5.26% is a reasonable price to pay for 36:1 jackpots.

It probably is. I'd forego all this Basic Strategy and card-counting stuff at a 0.26% game that at most would pay 3:2 if I hit a blackjack, if I could get a 35:1 payout at roulette.

>You are an idiot if you are playing red/black.
Not if its what the player wants to with his money... and if he knows that TimeAtTable is a major consideration for him considering his limited bankroll.

>A lot of people are not excited by even money bets.
True but they are more excited by them than by having to sit on the sidelines and watch others bet! So it may be that some players might agree with you and desire what they consider to be a "decent" payout of 35:1 but also know that at 5.26 percent they will not last long enough.

I might like to give roulette a try more often... you get to sit down and the cocktail waitress doesn't put the drink down at the level of your kneecaps.

Quote: FleaStiff

I might like to give roulette a try more often... you get to sit down and the cocktail waitress doesn't put the drink down at the level of your kneecaps.

Aside from some significant realities such as the availability of a seat and the more convenient placement of a beverage, a purely mathematical viewpoint is simple: at roulette you are paying 5.26percent to make an even-money outside bet whereas at craps, baccarat and blackjack you pay so much less to make an even money bet.

So I can see the wisdom of the "fool if you make outside bets" viewpoint. Paying the same 5.26percent house edge to make Inside Bets appears more reasonable since it will be a larger payoff, when as and if your Inside Bets actually win.

Its just that if you walk past an annunciator, you are often likely to see a string of Reds or a string of Blacks but are not likely to see a string on the same Straight-up Number.

You may be paying the same 5.26percent house edge, but Black or Red shows up far more often than a straight up number.

Quote: AZDuffman

We all know except for free odds in craps every bet in the casino has a built-in house advantage.
So, what do you all think is the "right" house advantage?

Perhaps those little old ladies with their blue hair and purple daubers have already discovered the "right" house advantage:

Bingo All Licensees in Clark County: 3.56% Win Rate
Bingo Downtown -1.80% Win Rate
Bingo The Strip n/a Win Rate
Bingo North Las Vegas -6.04% Win Rate

At minus 6.04 percent win rate, maybe those little old ladies playing Bingo from dawn to dusk while slurping free drinks have found themselves a pretty good deal? It would seem those on the Boulder Strip ain't doing so well though.

Bingo is a difficult metric to work with.

Many of the games have a pre-determined payout regardless of the size of the buy-in.

Therefore, a change in the casino's win rate could simply mean a change in the attendance.

Twelve licensees comprise the North Las Vegas area, so a change in attendance might have to be a factor that affected several of the casinos, but I do see how it could be significant. Perhaps road construction, weather, etc.

Quote: FleaStiff

You may be paying the same 5.26percent house edge, but Black or Red shows up far more often than a straight up number.

House edge is not the only consideration. Variance, time at table, free drinks... they all play a role.
Even the Bingo Ladies who show up on the odd hours for Bingo, get out of the house, have social interaction, get some free booze and some excitement in their lives. Its not just the mathematical edge that is involved.

We all think sometimes that we have the edge because we "know" or "feel" what number will roll next. That annunciator has informed us there have been seven reds in a row, so now we "know" how to bet. That loud-mouthed drunk at the end of the table has sevened out every time he has held the dice so now we "know" to load up on the DontPass. The blackjack dealer has been batting her eyelashes at me and I've been tipping her so surely Karma will smile favorably upon me and I shall therefore increase my bets because now is the right time for Lady Luck to appear.

And house edge? Well, before my fourth drink or afterwards?