Gambling on gambling in Baccarat : financial implications of raising bet limits and table differentials

Spence, Mark, Sugden, Stephen John, & Kale, Sudhir (2013) Gambling on gambling in Baccarat : financial implications of raising bet limits and table differentials. The Journal of Gambling Business and Economics, 7(1).

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The house advantage for Baccarat is known, hence the theoretical win can be determined. What is impractical to theoretically determine is the frequency and financial implications of extreme events, for example, prolonged winning streaks coupled with various betting patterns. The simulation herein provides such granularity. We explore the effect of following the „hot hand‟, that is, rapidly escalating bets when players are on a winning streak. To minimize their exposure, casino management sets a table bet maximum as well as a table differential. These figures can and do serve as a means to differentiate one casino from another. As the allowable bet maximum increases so does the total amount bet, which increases the theoretical winnings, thus suggesting that a high bet limit and differential is beneficial for the house. However, the greater are these amounts, the greater the number of shoes that end with players losing relative to a constant betting scenario (the number of times a player wins at all can drop from ~47% of the time to less than a quarter); but there will, on occasion, be more extreme payouts to players. This simulation is therefore intended to help casino managers set betting limits that maximize total winnings while bearing in mind both the likelihood and magnitude of negative outcomes to the casino.

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ID Code: 70854
Item Type: Journal Article
Refereed: Yes
Additional URLs:
ISSN: 1751-7990
Divisions: Current > Schools > School of Mathematical Sciences
Current > QUT Faculties and Divisions > Science & Engineering Faculty
Copyright Owner: Copyright 2013 University of Buckingham Press
Deposited On: 01 May 2014 22:57
Last Modified: 24 May 2014 22:15

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