Economics of Gambling

Question 1

Gambling Related Harm - (Goodwin Et Al 2017)

Answer 1

Relationships, Mental Health, Finance. The PGSI categorises risk for gambling; problem gamblers harm 6, moderate risk 3, low risk 1. Close family, children, are most impacted.
(Goodwin Et Al 2017)

Question 2

Behavioural Econcomics - Gambling Fallacies

Answer 2

Offer valuable perspective incorporating psychological concepts
Mental Accounting; money gambled doesn’t feel real, casino chips and credit doesn’t feel like real money
Loss Aversion; chase losses, sunk cost fallacy
Gamblers fallacy; after a sequence of same outcome, a negative autocorrelation is predicted
Hot hand fallacy; after a sequence of wins or losses, a positive autocorrelation is predicted
Presume independent events are dependently related
Bounded rationality; hard to process risks of complex bets
Herd behaviour; many gamblers operate within similar social networks
Anchoring; betting companies offer to match bets of certain size

Rather than traditional economics which presumes rationality, maximised benefits and minimised costs

Question 3

Behavioural Economics; Harm Reduction Approaches

Answer 3

Harm Reduction Approaches
Nudges; shift people towards a desired behaviour while preserving free choice
Politically easier to implement
Designed to address specific behavioural biases
Not tested at a large scale
Debate over whether they are enough to make a real and lasting difference

Potential Nudges
Cooling-off periods; automatic breaks, limits gamblers fallacy and hot hand fallacy
Mandatory Disclosure of spending and odds; texts messages of losses, reduces cognitive dissonance, bounded rationality, and loss aversion
Warning labels on risks like cigarettes
Higher value chips only allowed with cash mental accounting bias
Default bet at 0; reduces anchoring and default bias

Stronger policy options (shoves)
Banning sports advertising
Increase medicare spending on therapeutic counseling
Raise minimum gambling age
Increased financial eduction
Mandatory affordability checks for online gamblers
Daily limit on bets

Question 4

Lumpy Expenditures

Question 5

Liquidity; Herskowitz 2021 - Gambling, saving, and Lumpy Liquidity Needs

Answer 5

Do liquidity needs impact gambing, and by association does saving ability and salience of liquidity impact betting?

Methodology; randomised control trial of Uganda men from 18-45 who gambl e(36%, 12% of income)

Experiemnts;
Perceptions of saving ability; randomised budgeting excersizes and savings boxes, reduces demand

Emphasize the lumpy good that the person wants to buy before or after gambling, increases demand.
Winnings disproportionately spent on lumpy goods.

Question 6

Barriers to Gambling Policy

Answer 6

Barriers to Gambling Policy
Profit Motive; gambling generates funds for gambling industry and governments
Conflict of interest; reduce gambling = reduce revenue
Most gamblers without harm
Reno Model; harm reduction policies should not harm non-problematic gamblers

Voluntary use
Ladoouceur, Blaszynski, Lalande 2012
Many gamblers set time and expenditure limits, fail to adhere

Question 7

Herskowitz. (2021). “Gambling, Saving, and Lumpy Liquidity Needs.” American Economic Journal: Applied Economics,13(1).

Question 8

Gainsbury, Tobias-Webb, and Slonim. (2018). “Behavioral Economics and Gambling: A New Paradigm for Approaching Harm-Minimization.” Gaming Law Review, 22(10).