From: emmerik@titan.trl.OZ.AU (Mike VanEmmerik)
Subject: Re: Betting both sides to get Comps
Organization: Telecom Research Labs, Melbourne, Australia
Date: Tue, 18 Aug 1992 11:13:00 GMT

jacobs@cs.utah.edu (Steven R Jacobs) writes:

>In article <1992Aug13.080700.3263@trl.oz.au> emmerik@titan.trl.OZ.AU (Mike VanEmmerik-ITG Brisbane) writes:

>>>[munch]
>>>wrong bet.  All betting both sides does is reduces the variance of
>>>outcomes without affecting expectation.  I would think that a
>>>casino operator that comped 1 unit bets on right or wrong but not
>>>1/2 unit bets on both was acting irrationally.  Is there something
>>>I'm missing?
>>
>>Yep. Variance is where the casino makes most of its money, since most
>>people have too small a bankroll.

>Nonsense.  Expected gain is where the casino makes ALL of its money.
>Variance is not the casinos friend, except to the extent that it gives
>the players the illusion that they can win.

Ok, I looked it up. For 1986 (or possibly 1982-1986 averaged) the
industry total casino win percentage for Roulette was 24.8%. This is
averaged over 12 New Jersey casinos for 1 (or more) years figures. This
is a LONG term figure; Michael Hall would be proud of it :-). So, their
actual return is 25%, while their expectation is 5% (assuming no
cheating, and we all know that NJ is clean :=). So you tell me, are they
making money from expectation, or as a result of variance and the poor
betting patterns of the average gambler?
In a certain sense, expectation is where they make all their money, but
I like to think of expectation as a kind of ideal mathematical
theoretical concept, that can be written as 5.26%.

Sure, variance lets the average player win almost half of the time, but
typically players just bet it all back again until the next downswing
wipes it out, and they never get to the theoretical expectation because
they have insufficient bankroll.

>>Expectation (house percentage) is only
>>5.25% for Roulette (ignoring the 5 way bet), but they make 20%-30% due
>>to variance and low bankroll.

>They hold 20% to 30% because players tend to give enough action to risk
>their entire bankroll 5 or 6 times over.  The 5.25% edge at roulette
>multiplied by 500% of bankroll equals the 26% (or whatever) that the
>house keeps.  Variance has nothing to do with it.

Well, that's sure one way of looking at it. But how can you say that
variance has *nothing* to do with it? If variance were zero, all players
would lose very close to 5.26% every sitting, and the figure in Shelly's
book would read "5.26%".

>>If they figure on 20% of action as a comp,

>They'd quickly go broke with this kind of policy.  Comps for high roller
>are MUCH less than 20% of total action.  Think about it.  If Joe Moneybags
>is betting $200 a pop on blackjack and playing 50 hands/hr, his total
>action is $10,000/hr.  His free room/meals/airfare would be covered in
>the first hour of play if they comped at a 20% rate.

>>then variance reducing techniques will cost them money. Assuming they
>>flash to what is going on, of course. But they would not be acting
>>irrationally to be upset by this technique.

>Nonsense.  Variance reducing techniques will simply reduce the
>probability of completely busting some players, and increase the
>amount of time required for the house to reach "the long run".
>House take is expectation multiplied by total action.  Hold percentages
>give the pit critters something to worry about (besides card counters),
>and help them feel like they are doing something important.

Hmmm. I'm starting to suspect a misunderstanding of terms. The same
table quotes "Win" as 9,247 (million $US, I think) and "Drop" as 37,344.
Divide the first by the second, and multiply by 100%: 24.8%. I assume we
mean the same thing by "Drop" and "total action".

>In fact, the casinos would be smart to *encourage* variance reducing
>techniques by the players.  When you reduce your variance, you reduce
>the variance for the house as well.  Simultanously betting red/black
>on roulette or pass/don't at craps GUARANTEES that the house cannot
>loose money.  This reduces the casinos risk of ruin to ZERO.  They
>wouldn't have to keep large sums of cash on hand to pay the winners
>if everyone played this way, since there would be no winners.

>Moral:  What's good for the goose is good for the gander.  Reducing
>player variance, when the house has the edge, simply tends to ensure
>that the casino will take your money.  Sure, you can smooth out the
>bumps in your bankroll by reducing variance, but when the house has
>the advantage this simply smoothes away the fluctuations that sometimes
>put the player ahead.

Sorry, cant agree. With variance, average player loses 25%. Without, he
loses 5%. I prefer the latter, especially if the casino will comp me for
something more than 5% of my action.

>Now, if the casino will comp at a good enough rate to make up for the
>"slow leak" that gently robs you of your money, then a minumum variance
>approach would be useful.  But, finding a place that gives cash back
>after they've paid for RFB (room/food/beverage) and airfare is going to
>be tricky.  By the time you've given enough action to qualify for major
>comps, you will have paid for those comps several times over with or
>without variance.
>--
>Steve Jacobs  ({bellcore,hplabs,uunet}!utah-cs!jacobs, jacobs@cs.utah.edu)
--
Mike Van Emmerik        \ Slots can have a positive expectation.
Telecom Australia       \ The jackpot has to be high enough, and
emmerik@titan.trl.oz.au \ you have to know how to pull optimally
Newsgroups: rec.gambling