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Business profitability versus social profitability: evaluating industries with externalities, the case of casinos

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  • Earl L. Grinols

    (Department of Economics, University of Illinois, USA)

  • David B. Mustard

    (Department of Economics, Terry College of Business, University of Georgia, USA)

Abstract

Casino gambling is a social issue, because in addition to the direct benefits to those who own and use casinos, positive and negative externalities are reaped and borne by those who do not gamble. To correctly assess the total economic impact of casinos, one must distinguish between business profitability and social profitability. This paper provides the most comprehensive framework for addressing the theoretical cost-benefit issues of casinos by grounding cost-benefit analysis on household utility. It also discusses the current state of knowledge about the estimates of both the positive and negative externalities generated by casinos. Lastly, it corrects many prevalent errors in the debate over the economics of casino gambling. Copyright © 2001 John Wiley & Sons, Ltd.

Suggested Citation

  • Earl L. Grinols & David B. Mustard, 2001. "Business profitability versus social profitability: evaluating industries with externalities, the case of casinos," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(1-3), pages 143-162.
    • Handle: RePEc:wly:mgtdec:v:22:y:2001:i:1-3:p:143-162
    DOI: 10.1002/mde.1004
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    References listed on IDEAS

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    1. Rachel A. Volberg & Dean R. Gerstein & Eugene M. Christiansen & John Baldridge, 2001. "Assessing self-reported expenditures on gambling," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(1-3), pages 77-96.
    2. Frank L. Quinn, 2001. "First do no harm: what could be done by casinos to limit pathological gambling," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(1-3), pages 133-142.
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    Cited by:

    1. Michael Wenz, 2008. "Matching estimation, casino gambling and the quality of life," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(1), pages 235-249, March.
    2. Leventis, Stergios & Hasan, Iftekhar & Dedoulis, Emmanouil, 2013. "The cost of sin: The effect of social norms on audit pricing," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 152-165.
    3. Michael Wenz, 2014. "Casinos, Gambling, and Economic Development: An Introduction to the Special Issue," Growth and Change, Wiley Blackwell, vol. 45(1), pages 1-4, March.
    4. repec:zbw:bofrdp:2013_013 is not listed on IDEAS
    5. Michael Wenz, 2014. "Valuing Casinos as a Local Amenity," Growth and Change, Wiley Blackwell, vol. 45(1), pages 136-158, March.
    6. Arun K. Srinivasan & Thomas E. Lambert, 2017. "The Impact of Stagnating Casino Revenues on State and Local Governments Tax Receipts," Public Budgeting & Finance, Wiley Blackwell, vol. 37(1), pages 26-46, March.
    7. Michael J. Hicks, 2014. "Do Good Fences Make Good Neighbors? The Cross Border Impact of Casino Entrance," Growth and Change, Wiley Blackwell, vol. 45(1), pages 5-20, March.
    8. Douglas M. Walker, 2008. "The Diluted Economics of Casinos and Crime: A Rejoinder to Grinols and Mustard’s Reply," Econ Journal Watch, Econ Journal Watch, vol. 5(2), pages 148-155, May.
    9. Tiffany Cheng Han Leung & Robin Stanley Snell, 2017. "Attraction or Distraction? Corporate Social Responsibility in Macao’s Gambling Industry," Journal of Business Ethics, Springer, vol. 145(3), pages 637-658, October.
    10. Leventis, Stergios & Hasan, Iftekhar & Dedoulis, Emmanouil, 2013. "The cost of sin: The effect of social norms on audit pricing," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 152-165.
    11. Moellman, Nicholas & Mitra, Aparna, 2013. "Indian gaming in Oklahoma: Implications for community welfare," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 45(C), pages 64-70.
    12. Douglas M. Walker, 2008. "Do Casinos Really Cause Crime?," Econ Journal Watch, Econ Journal Watch, vol. 5(1), pages 4-20, January.
    13. Srinivasan, Arun & Lambert, Thomas, 2015. "The Impact of Stagnating Casino Revenues on State and Local Tax Receipts," MPRA Paper 69738, University Library of Munich, Germany.
    14. Douglas M. Walker, 2007. "Problems in Quantifying the Social Costs and Benefits of Gambling," American Journal of Economics and Sociology, Wiley Blackwell, vol. 66(3), pages 609-645, July.
    15. Islam, Md. Monirul & Sohag, Kazi & Berezin, Andrey & Sergi, Bruno S., 2024. "Factor proportions model for Russian mineral supply-driven global energy transition: Does externality matter?," Energy Economics, Elsevier, vol. 129(C).

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