Gambling Flashcards
(15 cards)
Gambling Related Harm
11,000 per capita per year, higher than other countries. Harms relationships (spouses and children), health, emotions, then financial.
Goodwin Et Al 2017 - how many people on average harmed by someone else’s gambling.
1. Problem Gambling - 6 others
2. Moderate Risk - 3 others
3. Low-risk - 1 person.
Behavioral Economics
Gainsbury, Tobias-Webb, Slonim 2018
> Traditional economics; decisions and behavior based on purely rational choice, humans act to maximize benefits and minimized costs. Individuals act against long-term interest, tension between immediate and delayed gratification.
> Behavioral economics; incorporates psychology
- Mental Accounting; money doesn’t feel real
- Loss aversion; sunk cost fallacy, try to recover losses
- Gamblers fallacy; after a sequence of the same outcome, a negative autocorrelation is predicted (3 blacks = red)
- Hot Hand Fallacy; after a sequence of wins of losses, a positive autocorrelation is predicted
- Bounded rationality; hard to process risks of complex bets
- Herd behavior; many gamblers operate within similar social networks
- Anchoring; betting companies match bets of certain time
Mental Accounting
Money spent on gambling is not real money, winnings are different money.
Loss Aversion
The psychological tendency where people are more motivated to avoid a loss than they are to pursue an equivalent gain. People may take more risks to make back a loss than to make a gain.
Gamblers Fallacy
Negative Autocorrelation; The mistaken belief that past events in a series of independent trials influence the probability of future events, leading to gamblers continuing to bet as they believe they are due for a win.
Hot-Hand Fallacy
Positive autocorrelation
Bounded Rationality
Hard to process complex risks; gamblers make decisions based on the limited information available while betting rather than actual or perfect rationality, leading to excessive bets.
Herd Behaviour
Gamblers tend to follow the crowd and place their wagers on the popular opinion rather than rational behavior.
Anchoring
this might be the initial odds or a potential payout, which can skew their perception of the bet’s value
Nudges (gambling)
Nudges shift people toward a desired behavior while
preserving their ability to choose between the available
options, easier to implement, often untested at a large scale. Requires randomized controlled trials
- 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 education
- Mandatory affordability checks for online gamblers
- Daily limit on bets
Lumpy Expenditures
large-sized expenditures that must be paid with a liquid asset. Includes business investment, household purchases, and personal expenses.
Liquidity Needs
Needed for business investment, household purchases, personal expenses. Raised through credit or savings, often in weak economies there are bad and ill suited borrowing options.
Herskowitz. (2021). “Gambling, Saving, and Lumpy Liquidity Needs.” American Economic Journal: Applied Economics,13(1).
The research question
- Are unmet liquidity means and financial constraints pushing people towards gambling?
- Does improved savings reduce betting?
- Does salience of liquidity needs increase betting?
- Does improved perception of saving ability reduce betting?
Methodology;
- Year long randomized controlled trial of Ugandan men from 18-40.
Respondents are poor. Pressure on finances.
Low available liquidity, but some potential saving
High betting expenditures. Targeting win amounts they could save
- Random provision of saving boxes reduces gambling
- Randomized primes for lumpy goods increase bets
- Randomized budgeting excursise
Gainsbury, Tobias-Webb, and Slonim. (2018). “Behavioral Economics and Gambling: A New Paradigm for Approaching Harm-Minimization.” Gaming Law Review, 22(10).Links to an external site.
Includes; barriers to gambling policy, nudges and shoves, behavioral and traditional economics, fallacies.
Barriers to Gambling Policy
- Gambling generates significant funds for the gambling
industry and for governments. Conflict of interest. - Should not impact the profits of non-problem gamblers.
Reno model, a science-based responsible gambling framework, recognizes that effective
harm-reduction policies should not unnecessarily disrupt non-problematic gamblers - Strategies that rely on voluntary use by gamblers are poorly
utilized by gamblers (Ladouceur, Blaszcynski, Lalande, 2012) - Failure to appropriately target and identify specific behaviors, such as clearly defined harm, non-specific policy, absence of relevant metrics like crime and divorce.
