We focus our attention on three of the commonly cited criticisms of the gambling industry - it leads to addictive behavior (with potentially harmful individual and societal effects), it leverages "irrational" consumer beliefs and it uses marketing incentives to influence gamblers. We use the commonly accepted definition of addiction from the economics literature to test for its presence i.e., that current consumption is affected by past consumption. We fit a model of the play decision and bet amount (given play) to data from a consumer panel of casino visitors over a two year period. Our data are at a highly disaggregate level - we look at play decisions within a given trip for individual consumers. Our modeling approach allows us to exploit the rich variation in the data both across and within individuals.
Our results show that, controlling for other reasons that could induce play, only about 8% of all consumers show evidence for addiction (as defined by us). While this proportion may look small (in absolute terms), it is consistent with research in other academic fields that has focused on casino gamblers. This result also suggests, that for a majority of casino gamblers, the failure to find patterns of addiction may be interpreted as support for the view that the role of casinos for these gamblers is to provide entertainment.
-Adolescents are the largest and most vulnerable population addicted to gambling.
The next generation is the first in modern American history to grow up in an era when gambling is legally sanctioned and culturally approved. Tragically, adolescents have proven extremely susceptible to the enticements of gambling, and are becoming hooked at rates even greater than their adult counterparts. Past research on youth gambling, focusing on prevalence rates, found that pathological gambling rates for adolescents appear to range anywhere between two to four times that of adults.1 Researchers believe we are seeing just a tip of the iceberg.
"If this [gambling] were a children's toy, it would be pulled off the market immediately. We would not tolerate it." — Earl Grinols, University of Illinois economics professor
Parents, Protectors
A number of studies have shown that many youths will be exposed to gambling through parents' participation, such as buying lottery tickets, playing cards for money, visiting casinos and making wagers.2 It's not unusual for parents to give their children lottery tickets for their birthdays or Christmas. Many fathers attend sports events with their children, placing wagers on the team, horse or dog favored to win.3
Studies consistently confirm that parental disapproval (or approval) of specific behaviors is one of the strongest protective factors in a child’s life against risky behavior. Conversely, parental dismissal or advocacy of certain destructive behaviors can be profoundly detrimental to children.4
Many gamblers with problem and pathological addictions began gambling between 10 to 13 years of age.5
Eugene F., a recovering addict who asks to be identified only by his Gamblers Anonymous name, who remembers going to the track with his father at age 14. "He would place $ 2 bets for me. It was win-win. If I won, I got to keep the money. If I lost, it was his money." Eventually, Eugene's parents "lost" $ 20,000, paying off their son's bookies before he got help from Gamblers Anonymous.6
Children and Adolescents: Most Vulnerable
A child or adolescent's brain is still under construction. Their brains differ from adults, in that children's brains operate primarily from the lymbic system or the seat of emotion. They function on gut reactions and appeal. They do not have a fully developed prefrontal cortex, which allows rational thinking, risk assessment and discernment. The prefrontal cortex has been dubbed "the area of sober second thought."7
An estimated 7,900,000 American adolescents are already addicted to gambling. They represent over half of all people in the United States with problem or pathological gambling addictions.8 You could fill most any NFL football stadium over 100 times to capacity with American youth that are addicted to gambling.
Howard Shaffer, director of the Center for Addiction Studies at Harvard Medical School, conducted a meta-analysis of youth gambling studies in North America. He found the rate of problem gambling among youths ranged between 9.9 to 14.2 percent, while 4.4 to 7.4 percent were already exhibiting compulsive gambling behaviors.9
Research indicates that adolescents are about three times more likely than adults to become problem gamblers.10 Studies also show adolescents are up to five times more likely to develop gambling-related problems than adults.11
Adolescents are especially susceptible to video gambling because of their familiarity with video games, vivid graphics, action, speed, anonymity, accessibility and availability. No adult need be present for an underage adolescent to play a video gambling machine and adult supervision is often lacking when convenience gambling is available.12
Video lotteries, video poker and video slots have earned their reputation as the "crack cocaine" of the gambling industry, because of their highly addictive nature.13 In the summer of 2000, South Carolina removed between 34,000 to 36,000 video poker games from their state, because of the dramatic increase in pathological gambling addiction.14
Kids Are Gambling
A gambling prevalence study found over 80 percent of adolescents (12 to17 years old) have gambled in the past year.15 In the age of video gambling, machines don’t ask your age.
Henry Lesieur, of Illinois State University, estimates that 6% to 8% of youngsters aged 13 to 17 nationally are problem gamblers. Other social science experts who, like Lesieur, base their estimates on an evaluation of the accumulated state studies and their own research on addiction echo that rate.16
The Massachusetts Attorney General’s office conducted a sting operation in which 66 percent of minors were able to place bets on Keno games. The sting tested compliance at 90 different locations and involved adolescents as young as 14. The minimum legal age to gamble on Keno in Massachusetts is 18.17 An earlier survey by the Massachusetts Attorney General’s office found that 80 percent of minors in Massachusetts were able to purchase lottery tickets.18
Nearly six percent of the high school Seniors surveyed by the Louisiana State University Medical School researchers met the criteria for pathological gambling, while 16 percent could be classified as problem gamblers.19
New Jersey casinos reported ejecting nearly 26,000 underage persons some time after they had managed to enter the casinos. Another 136,000 juveniles attempted to enter the casinos but were prevented from doing so. “Juvenile Suspected Underage Report: January to December 1995,” New Jersey Casino Control Commission.20
In 2002, the University of Florida conducted research on 13-17-year-old adolescent gambling in Florida. They found the mean age for gambling initiation was 12.5 years, and 80,608 Florida adolescents (8.2%) are at-risk gamblers, while 37,355 Florida adolescents (3.8%) are problem or pathological gamblers.21
The Fallout from Adolescent Gambling
In studies of gambling behaviors among high school students, one in 10 report committing illegal acts to obtain gambling money or to pay gambling debts.22
A survey of high school students in Massachusetts found that 5 percent had been arrested for a gambling-related offense. The survey further found that 10 percent of students reported experiencing family problems because of their gambling, 8 percent had gotten in trouble at work or school due to their gambling activities, and 13 percent reported being unable to stop gambling when they wanted.23
Bill Eastbrooks, a former school principal, said he saw children coming to school without lunches because their parents were addicted to VLTs. He knew of several people who killed themselves over gambling.24
An investigation by The Canadian Press found more than 10 percent of suicides in Alberta and more than six per cent in Nova Scotia were linked to gambling in 2001.25 In the United States, one in five pathologically addicted gamblers will attempt suicide.26
In terms of irrational beliefs, our analysis allows us to test for behavior based on two such beliefs - the "hot hand myth" and the "gamblers fallacy." We find evidence for the gamblers fallacy in both directions - consumers who win (lose) a bet are less (more) likely, on average, to continue betting. We believe this is the first study to conduct such an analysis on individual-level behavioral data (as opposed to laboratory settings).
We also find that marketing activity has a positive effect on the decision to play and the amount to bet. In terms of effect size, marketing (comps) seem to be more similar to advertising rather than price promotions. Finally, we find some evidence that marketing activity is more effective for consumers who exhibit more addictive behavior. -
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