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Casino regulations and economic welfare

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  • Juin‐Jen Chang
  • Ching‐Chong Lai
  • Ping Wang

Abstract

This paper studies the entry and tax regulation of oligopolistically competitive privately run casinos and government‐run casinos in a jurisdiction. We highlight three important external effects from casino‐style gambling: non‐casino income creation, social disorder costs, and cross‐border gambling. The laissez‐faire equilibrium need not be overcrowding compared with regulated or government‐run regimes. Entry regulation may lead to higher jurisdiction welfare than tax regulation. Government‐run casinos always operate on a larger scale and achieve higher welfare than other regimes, given the same number of casinos. With an endogenous fraction of external gamblers, a dispersed casino configuration yields higher welfare than a centralized one. Ce texte étudie les réglementations à l’entrée et de nature fiscale dans un monde oligopolistique concurrentiel où coexistent des casinos opérés par les secteurs privé et gouvernemental. On souligne trois effets externes importants des jeux d’argent de style casino : la création de revenu de type non‐casino, les coûts du désordre social engendré, et le fait que ces jeux d’argent transgressent les frontières. L’équilibre de laissez‐faire n’engendre pas nécessairement sur‐encombrement par rapport à des régimes réglementés ou opérés strictement par le gouvernement. Les régulations de l’entrée peuvent engendrer des effets de bien‐être plus grands pour la juridiction que la réglementation fiscale. Les casinos opérés par le gouvernement opèrent toujours sur une plus haute échelle et engendrent des effets de bien‐être plus grands que les autres régimes pour un nombre donné de casinos. Compte tenu qu’il existe une fraction endogène de joueurs externes, une configuration dispersée de casinos donnent des effets de bien‐être plus grands qu’une configuration centralisée.

Suggested Citation

  • Juin‐Jen Chang & Ching‐Chong Lai & Ping Wang, 2010. "Casino regulations and economic welfare," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(3), pages 1058-1085, August.
    • Handle: RePEc:wly:canjec:v:43:y:2010:i:3:p:1058-1085
    DOI: 10.1111/j.1540-5982.2010.01606.x
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    References listed on IDEAS

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    Cited by:

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    2. Chang, Juin-Jen & Fiedler, Ingo & Lai, Ching-Chong & Wang, Ping, 2021. "Cross-border casino competition, Externalities and Optimal Tax Policy: A Unified Theory with Quantitative Analysis," Regional Science and Urban Economics, Elsevier, vol. 88(C).
    3. Laszlo Goerke, 2022. "Partisan competition authorities, Cournot‐oligopoly, and endogenous market structure," Southern Economic Journal, John Wiley & Sons, vol. 89(1), pages 238-270, July.
    4. Lou, Loretta, 2021. "Casino capitalism in the era of COVID-19: examining Macau’s pandemic response," LSE Research Online Documents on Economics 111026, London School of Economics and Political Science, LSE Library.
    5. Brad R. Humphreys & Jane E. Ruseski, "undated". "Legalized Sports Betting and Mental Health," Working Papers 24-04, Department of Economics, West Virginia University.
    6. Humphreys, Brad R. & Marchand, Joseph, 2013. "New casinos and local labor markets: Evidence from Canada," Labour Economics, Elsevier, vol. 24(C), pages 151-160.
    7. Laszlo Goerke, 2022. "Endogenous Market Structure and Partisan Competition Authorities," IAAEU Discussion Papers 202201, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    8. Brad R. Humphreys & John A. Nyman & Jane E. Ruseski, 2021. "The Effect of Recreational Gambling on Health and Well-Being," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(1), pages 29-75, January.
    9. Juin-Jen Chang & Ching-Chong Lai & Ping Wang, 2017. "A Tale of Two Cities: Cross-Border Casino Competition Between Detroit and Windsor," NBER Working Papers 23969, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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