From: hall@kronos.arc.nasa.gov (Michael Hall)
Subject: Re: Betting both sides to get Comps
Organization: NASA/ARC Information Sciences Division
Date: Thu, 13 Aug 1992 16:20:35 GMT

In article <JACOBS.92Aug13074525@cells.cs.utah.edu> 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.

Tell 'em, Steve!  (Well, except for the quibble I have below.)

>>If they figure on 20% of action as a comp,
>
>They'd quickly go broke with this kind of policy.

Right.  He was probably confusing it with 20% of the drop.

>>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.
>
>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....

Variance will cause most players with small bankrolls to go bust,
but it will also result in those few lucky ones who can't lose a bet.
Some (most?) of these lucky ones go bonkers and keep betting bigger and
bigger until they finally hit a bad streak and give most of it back to the
casino.

Once when I was in Vegas playing blackjack, I kept hearing roars
from a craps table.  I later found out that a guy won $100,000 or $200,000
or something in under an hour starting with just a couple hundred.
He couldn't have won that much without betting wildly. The casino
gave him a couple of security escorts (supposedly to protect
him but more likely to keep him from setting foot outside the casino),
no doubt a big suite, etc., all of which was probably way under the amount
the casino could afford to comp him considering the action, plus no doubt
the poor guy wound up with not a penny to his name a couple of days later,
getting the heave ho from the suite once the casino got what it wanted.

So, I think it's not correct to say that variance does not alter the
casino's expected earnings.  Variance does not alter the expected
casino percentage win per bet, but it does alter the action
the casino receives.

>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.

When the casino comps you for a hotel room that you would have paid
$100 for, it's not costing the casino $100, because they own the hotel
too after all.  I don't know how much it costs them, but suppose
it's $25.  At blackjack, they kick back 0.25% of your action in
comps, figuring on making 0.5% off basic strategists (on a shoe or Northern
Nevada single deck) and 1% or more off the average player.  If you play $25
a hand for four hours, that's about
 0.25%($comp/action)*($25 action/hand)*(100 hands/hour)*(4 hours)= $25 comp.

Presto, you get a $100 hotel room, but maybe you played basic
strategy and so you really only paid $50 on average for it.  You're
happy, because you got a $100 hotel room for the price of $50 of expected
value loss, and the casino is happy, because they got $50 for the price of
$25 in comps.  The point is, negative expected value gambling (even betting
red and black on roulette, parish the thought) *can* be a good deal to
everyone, and no one has to get "screwed".  Everyone can gain utility
from the transaction, renewing our faith the capitalist system :-)

-- 
Michael Hall            \ Variance... can't make money with it, can't make
NASA Ames Research Center\ money without it.
hall@ptolemy.arc.nasa.gov \