Why Use Different Denominations Win Playing Slot Machines

The gaming industry is big business in the U.S., contributing an estimated US$240 billion to the economy each year, while generating $38 billion in tax revenues and supporting 17 million jobs.

Why use different denominations win playing slot machines dispense

Regardless of format, the message is consistent. Higher-denomination machines return a higher percentage of wagers to bettors than do lower-denomination machines. As for your other questions, there is a variety of reasons players choose low-denomination games - especially pennies, nowadays - instead of the higher-paying dollar-and-up machines.

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What people may not realize is that slot machines, video poker machines and other electronic gaming devices make up the bulk of all that economic activity. At casinos in Iowa and South Dakota, for example, such devices have contributed up to 89 percent of annual gaming revenue.

Spinning-reel slots in particular are profit juggernauts for most casinos, outperforming table games like blackjack, video poker machines and other forms of gambling.

What about slot machines makes them such reliable money makers? In part, it has something to do with casinos’ ability to hide their true price from even the savviest of gamblers.

The price of a slot

An important economic theory holds that when the price of something goes up, demand for it tends to fall.

But that depends on price transparency, which exists for most of the day-to-day purchases we make. That is, other than visits to the doctor’s office and possibly the auto mechanic, we know the price of most products and services before we decide to pay for them.

Slots may be even worse than the doctor’s office, in that most of us will never know the true price of our wagers. Which means the law of supply and demand breaks down.

Casino operators usually think of price in terms of what is known as the average or expected house advantage on each bet placed by players. Basically, it’s the long-term edge that is built into the game. For an individual player, his or her limited interaction with the game will result in a “price” that looks a lot different.

For example, consider a game with a 10 percent house advantage – which is fairly typical. This means that over the long run, the game will return 10 percent of all wagers it accepts to the casino that owns it. So if it accepts $1 million in wagers over 2 million spins, it would be expected to pay out $900,000, resulting in a casino gain of $100,000. Thus from the management’s perspective, the “price” it charges is the 10 percent it expects to collect from gamblers over time.

Individual players, however, will likely define price as the cost of the spin. For example, if a player bets $1, spins the reels and receives no payout, that’ll be the price – not 10 cents.

So who is correct? Both, in a way. While the game has certainly collected $1 from the player, management knows that eventually 90 cents of that will be dispensed to other players.

A player could never know this, however, given he will only be playing for an hour or two, during which he may hope a large payout will make up for his many losses and then some. And at this rate of play it could take years of playing a single slot machine for the casino’s long-term advantage to become evident.

Short-term vs. long-term

This difference in price perspective is rooted in the gap between the short-term view of the players and the long-term view of management. This is one of the lessons I’ve learned in my more than three decades in the gambling industry analyzing the performance of casino games and as a researcher studying them.

Let’s consider George, who just got his paycheck and heads to the casino with $80 to spend over an hour on a Tuesday night. There are basically three outcomes: He loses everything, hits a considerable jackpot and wins big, or makes or loses a little but manages to walk away before the odds turn decidedly against him.

Different Types Of Slot Machines

Of course, the first outcome is far more common than the other two – it has to be for the casino to maintain its house advantage. The funds to pay big jackpots come from frequent losers (who get wiped out). Without all these losers, there can be no big winners – which is why so many people play in the first place.

Specifically, the sum of all the individual losses is used to fund the big jackpots. Therefore, to provide enticing jackpots, many players must lose all of their Tuesday night bankroll.

What is less obvious to many is that the long-term experience rarely occurs at the player level. That is, players rarely lose their $80 in a uniform manner (that is, a rate of 10 percent per spin). If this were the typical slot experience, it would be predictably disappointing. But it would make it very easy for a player to identify the price he’s paying.

Raising the price

Ultimately, the casino is selling excitement, which is comprised of hope and variance. Even though a slot may have a modest house advantage from management’s perspective, such as 4 percent, it can and often does win all of George’s Tuesday night bankroll in short order.

This is primarily due to the variance in the slot machine’s pay table – which lists all the winning symbol combinations and the number of credits awarded for each one. While the pay table is visible to the player, the probability of producing each winning symbol combination remains hidden. Of course, these probabilities are a critical determinant of the house advantage – that is, the long-term price of the wager.

Jackpots

This rare ability to hide the price of a good or service offers an opportunity for casino management to raise the price without notifying the players – if they can get away with it.

Casino managers are under tremendous pressure to maximize their all-important slot revenue, but they do not want to kill the golden goose by raising the “price” too much. If players are able to detect these concealed price increases simply by playing the games, then they may choose to play at another casino.

This terrifies casino operators, as it is difficult and expensive to recover from perceptions of a high-priced slot product.

Getting away with it

Consequently, many operators resist increasing the house advantages of their slot machines, believing that players can detect these price shocks.

Our new research, however, has found that increases in the casino advantage have produced significant gains in revenue with no signs of detection even by savvy players. In multiple comparisons of two otherwise identical reel games, the high-priced games produced significantly greater revenue for the casino. These findings were confirmed in a second study.

Names Of Different Slot Machines

Further analysis revealed no evidence of play migration from the high-priced games, despite the fact their low-priced counterparts were located a mere 3 feet away.

Importantly, these results occurred in spite of the egregious economic disincentive to play the high-priced games. That is, the visible pay tables were identical on both the high- and low-priced games, within each of the two-game pairings. The only difference was the concealed probabilities of each payout.

Armed with this knowledge, management may be more willing to increase prices. And for price-sensitive gamblers, reel slot machines may become something to avoid.

4ofaKind
In both Atlantic City and Las Vegas, the game program chip in multi-denomination slot machines includes separate programs for each different denomination. Each game has its own theoretical payback percentage.
If playing multi-denomination machines online, we've been told that their is only one program with one setting having all the different denominations operating with the same payback percentage at the same time.
If that was in fact true; are there any added advantages for the casino or the player while the game is operating under these two different formats?
FleaStiff
Frankly, I don't know if either of the two assertions you make are in fact true. They probably are, but I don't really know.
I think all this 'denomination' stuff about slot machines is deceptive. I hear about a Penny Slot and I sure don't see very many people putting in a lone penny and then pulling the handle on it. It sure is strange sit at a Dollar machine and put in five of them per spin. So if by Multi Denominational they mean I can stay seated there and select rather than amble around the place and select, I sure don't consider there to be all that much difference.
The Gaming Board apparently reports MultiDenominational machinces differently than the Sole Denominational machines. I don't see much of a difference in the adjectives though.

Why Use Different Denominations Win Playing Slot Machines Play

4ofaKind
A multi-denomination machine just means the player could select pennies, nickles, quarters or dollars before playing at the same game. Nevada G.C. requires each separate denomination to have its own program within the game therefore every denomination would have its own theoretical payback percentage, as chosen by the casino. This regulation requirement is for stand alone machines as well as server based. I'm certain if the casino chose they could also have all denominations set the same. But according to 'Casino Player' magazine most casinos lower their hold for each larger denomination the player selects.
It is impossible to read any gaming regulations regarding Online Casinos and for some reason the alleged regulators keep this information along with any other requests for regulations a guarded secret. I personally e-mailed along with sending via snail mail written requests to five different online gaming regulator jurisdictions requesting gaming regulations, and didn't even get a response from one of them that they even received my requests. Online casino reps. that communicate to players via forums also refuse to engage in any discussions regarding regulations. Online gamers should assume if their are any gaming regulations that even exist, they certainly aren't being enforced.
Most online slot games are multi-denomination games. An alleged online gaming technician (programmer) once posted that all online multi-denomination games, have only one setting or program within meaning that all would operate off whatever this one setting the operator selected.
My question is having the option to play under each of these two different programming formats, does one or the other offer a better advantage for the player?
FleaStiff

Why Use Different Denominations Win Playing Slot Machines Jackpots

As to online regulations, the promulgator of such regulations probably doesn't really exist as anything but a rubber stamp in some lawyers office.
As to selecting one of several RNGs versus using the only RNG in there, I don't see much of a difference. I'll wait for others to post and perhaps get a new perspective on just what is up here.