The Economics of Table Games: How Casinos Balance Risk and Reward

Casinos are a business, and like any good business model, they need to generate revenue to stay afloat. While the biggest casino resorts can make money off their hospitality and leisurely facilities, the big money maker is the casino games. These games are designed carefully to ensure the casino will make a profit in the long run.

There are lots of different minutia in the games through which casinos can get the upper hand on gamers. Depending on the complexity of the paytables and the probabilities of bets winning, it is fair to say that players have a tough job in managing their bankroll. But here we will break down the edge in each of the casino games, showing you how they can ensure profit in the long run. Plus, we will analyze a few tricks casinos can use to keep players engaged, and spending money on the games.

Where is the House Edge in Casino Games

You are not charged for entering a casino, nor does the casino add any fees for buying casino chips. You could just walk in, place a $500 bet at a roulette table to win $18,000, win it, and then walk away with no fees attached. The games are not rigged in any way, so you are guaranteed full fair play as far as gaming is concerned.

But the casino has to introduce an edge to ensure that in the bigger picture, it is going to make money. House edge is different in each casino game. It all depends on the minutia of each game such as the paytable structure, the probability of winning, and game rules that can give the casino the upper hand. They don’t need to rig their games or make any dirty tactics to gain the upper hand. And even if the house has an edge of just 0.5%, this can bring the casino huge profits. Just consider how hundreds of millions of dollars can circulate the biggest casino on the Vegas Strip in the course of just 1 day.

Game Design and Probability of Winning

The edge itself is extremely simple, and even beginners can understand how casinos make money in the likes of Roulette, Baccarat, Craps, Blackjack and so on. It is all down to the small nuances in the game rules, and the related payout structures.

Blackjack

The house edge is in the game rules. You draw 2 cards and must make a decision, whereas the house only has 1 card face up. You have a greater chance of going bust or falling short of the house as it plays after you have made your moves. In several variants, such as the ones where dealers hit on soft 17, the edge is a little higher for the house.

Roulette

In French or European Roulette, the house has an edge because of the 0 segment. This extra pocket is not factored into any of the high/low, red/black, etc. Plus, the odds are given as if there was no extra segment. A straight bet pays 36x, but in reality, there are 37 segments. In American Roulette, the house edge is higher because there are 0 and 00 segments.

Baccarat

The odds would be evenly matched for Player and Banker bets, but the Banker bets win slightly more times because of the Third Card rules. To give Banker bets a house edge, casinos add commission onto any Banker bets. Ties are rare, and the odds do not match the likelihood of them happening. In variants where there is no commission, there are conditions relating to how the Banker bet wins, and some Banker bet wins will not pay out the full 1:1.

Craps

Craps bets such as the pass line have a lower house edge, whereas proposition bets have a big edge in favor of the house. But payouts still do not match the true odds of each bet winning.

Poker

In peer to peer poker, the casino does not participate in the games. Instead, it charges a rake on each pot, which is around 5%. You can think of it as a hosting fee, as the house does not play in peer to peer poker cashgames.

Paytable Structure and Variance

Another thing to consider is the payout structure. Most games have bets that pay out 1:1 or just under, which is easier for bettors to count with when making their strategies. You play 10 rounds, win 5 and lose 5, you should break even, or be just a little behind. But if you take Roulette, where there are payouts that range from 1:1 up to 35:1, it makes it more difficult for bettors to break down their bankrolls. Playing corner bets that cover 4 segments and pay out at 8:1, it makes it far more complicated to use progressive betting systems.

You need to win 1 from every 9 rounds to break even. So you must count in sequences of 9 rounds when making your bankroll and tracking your progress. In blackjack or baccarat, you can also find such bets, commonly listed among the popular side bets. These wagers pay out great sums of money, but they are also a lot riskier, and the house edge is much higher.

Another key aspect to consider here is the frequency of wins and variance. Variance is the amount at which the results deviate from the true odds. For instance, if you win 3 corner bets from 20 rounds of roulette, the variance has worked in your favor. Winning only 1 from 5 hands of blackjack, and variance favors the house. If you win exactly 2 from 4 hands of Banker bets in baccarat, the variance is practically 0. Variance makes it trickier to keep track and try to beat the house.

Are Betting Strategies Allowed?

We mentioned progressive betting strategies before. You may recognize a few such as the Martingale system, Fibonacci, Paroli, D’Alembert, or Reverse Martingale. These are progressions in which players change their stake after each round, based on the result of the previous round. Different strategies have different purposes. Martingale betting is the most aggressive, as it pushes for a win by doubling up after each loss. Paroli or Fibonacci are more balanced, as players can also reduce the stake under specific conditions, mitigating any losses suffered through variance.

Casinos are very familiar with these progressive betting tactics. Instead of making them illegal, the house encourages players to use them – but only up to a point. For instance, they can outdo Martingale bettors by setting betting limits. This ensures that even high stakes gamers cannot keep doubling up as at some point they will hit the limit and cannot finish the strategy.

But there are some strategies that casinos are more strict about. Card counting, while not specifically illegal, will not impress the house. Casinos cannot make card counting illegal, but if they suspect a player of counting cards at blackjack, they can ask them to leave. Or, the dealer can reshuffle the deck to reset the shoe and render the card counting useless.

Other tactics have also been used by players, but for the most part, they are not legal. Using advanced computer algorithms or software to determine the spin on a roulette wheel is illegal. Anyone who tampers with dice, cards, or other gaming equipment, will be ejected from the casino.

Psychological Tactics to Maximize Engagement

The games run on pure chance, and the outcomes are beyond the control of the casino. Variance can work in favor of the players, and casinos can lose a lot of money when an especially lucky player comes along. Even more so if that patron has thousands of dollars, and wins hundreds of thousands. But in the long run, variance will be mitigated and the money flowing into the casino will heavily outweigh the money going out.

All the casino owners have to do is bring players in, and get them spending money at the games. Casinos have a lot of tricks through which they can play on your psyche and make you want to play more. For example, they can give you complimentary beverages, free play through the loyalty programs, or exclusive invitations to special tournaments. Any little bonus or perk that comes your way is a means through which the casino wants to keep you playing. And why wouldn’t you, if you have just been given bonus chips to fund your next gaming session.

The most important thing to remember is that only you are in charge of your finances. You must gamble responsibly and not spend more money than you can afford to lose. While it can be tempting to test lady luck, you cannot forget that the house always has an edge. It really doesn’t matter which game you play or which bet you pick. Plan ahead, make bankrolls and play cautiously.