Supplying Slot Machines to the Poor

Melbourne Institute Working Paper No. 15/15

Date: 2015

Author(s):

Melisa Bubonya
David P. Byrne

Abstract

As gambling becomes increasingly accessible both in the U.S. and worldwide, governments face an important policy question: how should they exploit the industry’s growth to raise tax revenues while protecting individuals from the detrimental effects of gambling? Using data on slot machines from the largest per-capita gambling market in the world, Australia, we estimate a structural oligopoly model to: (1) quantify firms’ incentives to make gambling accessible among socio-economically disadvantaged groups; and (2) evaluate the effect of government policy (gambling taxes, supply caps and venue smoking bans) on the distribution of slot machine supply, tax revenue and problem gambling prevalence.

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  • Oligopoly, taxes, smoking ban, supply caps, slot machines, problem gambling, structural estimation