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If you had your own Gambling Machine you could adjust it to pay out less ?


It's surprising how commonly believed this is. The idea sounds simple at first but when looked at closer there is more to it than initially meets the eye. The idea is: If you got your own slot machine or gambling machine and set it up for other people to play against, then you could be a bit crafty about it and open up the back of the machine where you'd find a special secret control, and you could adjust this control so the percentage payout would be reduced, so the slot machine would pay out less money, so you would end up pocketing more of the money and becoming richer because of it!

Although the idea seems to make sense at first, it doesn't really work. Yes, it's true that if you own your own gambling machine then on average you are likely to end up making money (subject to local legal and cultural situations). Also, it's true that on some gambling machines you can make adjustments so the payout is higher or lower, say 99%, 95%, 90%, 80%, 75% etc. But what's not true is the subsequent assumption that by giving a lower payout rate you will make more money. To put it in simple terms: If you're too greedy your customers will become disheartened with the deal and won't play.

One way to think about this is to consider the extreme case where you adjust the payout rate to zero. Surely then, someone might say if they hadn't thought about it, you would keep 100% of the money! Yes, you would indeed keep 100%... of not much. After a short while no-one would put any more money in your machines.

Similarly, if the payout was 100%, although this would be very popular, it wouldn't make any money for you.

The answer is clearly some reasonable point somewhere inbetween, where the payout is enough to keep people interested but not so generous that you are failing to take any profit. The optimum payout level is surprisingly towards the generous end of the scale. I'm not going to stick a figure on it because there are always arguments about this kind of thing. But I know from ideas I have about how to set up and run your own business that customers are more attracted to the generous offer than to a setup that takes them for a fool. If you're offering people a better deal, then you have the customers and in contrast your rivals miss out by being too greedy.

People who play on slot machines, casinos, and games such as the National Lottery, are hoping they are going to win. Give them that hope, and they'll carry on playing.


Other references: football pools, bookies, and probabilistic magic