The gaming industry is big business in the U.S., contributing an estimated US$240 billion to the economy each year, while generating $38 billion in tax revenues and supporting 17 million jobs.
Slot machines are based on basic psychological principles identified by B.F Skinner in the 1960's. Skinner is renowned for an experiment that he conducted wherein pigeons were placed in a box (which came to be known as the Skinner box) and given a food pellet every time they pressed a lever. Knowing how slot machines work is the first step to learn the best slots secrets and tips to improve your chances to win. Despite the popularity of these games, slots are not easy to beat both when you play them on the best online casinos and at land-based slots rooms. Slots are games of. It used to be that you'd pull a lever, watch some numbers and pictures spin, and wait for quarters to pop out when you get lucky. But slot machines of the 21st century are of a whole different breed.
What people may not realize is that slot machines, video poker machines and other electronic gaming devices make up the bulk of all that economic activity. At casinos in Iowa and South Dakota, for example, such devices have contributed up to 89 percent of annual gaming revenue.
Spinning-reel slots in particular are profit juggernauts for most casinos, outperforming table games like blackjack, video poker machines and other forms of gambling.
What about slot machines makes them such reliable money makers? In part, it has something to do with casinos’ ability to hide their true price from even the savviest of gamblers.
The price of a slot
An important economic theory holds that when the price of something goes up, demand for it tends to fall.
But that depends on price transparency, which exists for most of the day-to-day purchases we make. That is, other than visits to the doctor’s office and possibly the auto mechanic, we know the price of most products and services before we decide to pay for them.
Slots may be even worse than the doctor’s office, in that most of us will never know the true price of our wagers. Which means the law of supply and demand breaks down.
Casino operators usually think of price in terms of what is known as the average or expected house advantage on each bet placed by players. Basically, it’s the long-term edge that is built into the game. For an individual player, his or her limited interaction with the game will result in a “price” that looks a lot different.
For example, consider a game with a 10 percent house advantage – which is fairly typical. This means that over the long run, the game will return 10 percent of all wagers it accepts to the casino that owns it. So if it accepts $1 million in wagers over 2 million spins, it would be expected to pay out $900,000, resulting in a casino gain of $100,000. Thus from the management’s perspective, the “price” it charges is the 10 percent it expects to collect from gamblers over time.
Individual players, however, will likely define price as the cost of the spin. For example, if a player bets $1, spins the reels and receives no payout, that’ll be the price – not 10 cents.
So who is correct? Both, in a way. While the game has certainly collected $1 from the player, management knows that eventually 90 cents of that will be dispensed to other players.
A player could never know this, however, given he will only be playing for an hour or two, during which he may hope a large payout will make up for his many losses and then some. And at this rate of play it could take years of playing a single slot machine for the casino’s long-term advantage to become evident.
Short-term vs. long-term
This difference in price perspective is rooted in the gap between the short-term view of the players and the long-term view of management. This is one of the lessons I’ve learned in my more than three decades in the gambling industry analyzing the performance of casino games and as a researcher studying them.
Let’s consider George, who just got his paycheck and heads to the casino with $80 to spend over an hour on a Tuesday night. There are basically three outcomes: He loses everything, hits a considerable jackpot and wins big, or makes or loses a little but manages to walk away before the odds turn decidedly against him.
Of course, the first outcome is far more common than the other two – it has to be for the casino to maintain its house advantage. The funds to pay big jackpots come from frequent losers (who get wiped out). Without all these losers, there can be no big winners – which is why so many people play in the first place.
Specifically, the sum of all the individual losses is used to fund the big jackpots. Therefore, to provide enticing jackpots, many players must lose all of their Tuesday night bankroll.
What is less obvious to many is that the long-term experience rarely occurs at the player level. That is, players rarely lose their $80 in a uniform manner (that is, a rate of 10 percent per spin). If this were the typical slot experience, it would be predictably disappointing. But it would make it very easy for a player to identify the price he’s paying.
Raising the price
Ultimately, the casino is selling excitement, which is comprised of hope and variance. Even though a slot may have a modest house advantage from management’s perspective, such as 4 percent, it can and often does win all of George’s Tuesday night bankroll in short order.
This is primarily due to the variance in the slot machine’s pay table – which lists all the winning symbol combinations and the number of credits awarded for each one. While the pay table is visible to the player, the probability of producing each winning symbol combination remains hidden. Of course, these probabilities are a critical determinant of the house advantage – that is, the long-term price of the wager.
This rare ability to hide the price of a good or service offers an opportunity for casino management to raise the price without notifying the players – if they can get away with it.
Casino managers are under tremendous pressure to maximize their all-important slot revenue, but they do not want to kill the golden goose by raising the “price” too much. If players are able to detect these concealed price increases simply by playing the games, then they may choose to play at another casino.
This terrifies casino operators, as it is difficult and expensive to recover from perceptions of a high-priced slot product.
Getting away with it
Consequently, many operators resist increasing the house advantages of their slot machines, believing that players can detect these price shocks.
Our new research, however, has found that increases in the casino advantage have produced significant gains in revenue with no signs of detection even by savvy players. In multiple comparisons of two otherwise identical reel games, the high-priced games produced significantly greater revenue for the casino. These findings were confirmed in a second study.
Further analysis revealed no evidence of play migration from the high-priced games, despite the fact their low-priced counterparts were located a mere 3 feet away.
Importantly, these results occurred in spite of the egregious economic disincentive to play the high-priced games. That is, the visible pay tables were identical on both the high- and low-priced games, within each of the two-game pairings. The only difference was the concealed probabilities of each payout.
Armed with this knowledge, management may be more willing to increase prices. And for price-sensitive gamblers, reel slot machines may become something to avoid.
The Psychology behind Slot Machines
Slots are some of the most widely played games at both land based and online casinos, but have you ever wondered why? What is so attractive about this games that players keep returning to them.
To understand this we'll examine the psychology behind slots and how casinos use this to their advantage to keep players gambling.
Slot machines are based on basic psychological principles identified by B.F Skinner in the 1960's. Skinner is renowned for an experiment that he conducted wherein pigeons were placed in a box (which came to be known as the Skinner box) and given a food pellet every time they pressed a lever. He then altered the box so that the pellets would only be awarded randomly when the pigeon pressed the lever. This system was referred to as variable ratio enforcement and the pigeons pressed the lever more often in this set-up and Skinner likened his box set-up to a slot machine.
In essence, the Skinner box operates by mixing tension and release ‐ the pigeon learns to press the lever to obtain a treat, and then when the pellet is not awarded when the lever is pressed an expectation is created that finds release when the food item is awarded on subsequent presses. Skinner discovered that if too little rewards were given, the bird would become frustrated and would stop pressing the lever, and if too many pellets were awarded the bird pressed the lever less frequently.
At this point if you're a slots player you may feel slightly insulted, because, after all, you're way more intelligent than a bird...right? Of course, but that doesn't mean that the same principles don't apply to humans. Think about it ‐ most multi-line slots pay out smaller, more frequent wins rather than paying out large jackpots, yet these machines have maintained their popularity amongst player for decades.
According to associate professor at MIT Natasha Schüll who has been involved in slots research for 15 years, slots continue the video poker trend by dolling out smaller wins in order to keep players on an even keel and not jolt their emotions too intensely in the form of either losses or wins. Schüll's research has shown that smaller wins are favoured by casinos, not only to curb losses but also because too-big wins cause players to pause, think about the money involved, cashout and leave, but stretching out game play with smaller wins allows them to stay in the flow and keep playing, enjoying one small reward after the next without any perceived risk whatsoever.
It is no wonder then that modern slot machines payout around 45 percent of all spins instead of the miniscule 3 percent that their predecessors offered.
Schüll's findings are supported by a white paper published in 2010 by the American Gaming Association which stated that games with lower volatilities generally have greater appeal in 'local markets' as opposed to casino resort destinations like Las Vegas, Macau and Atlantic City. They found that players usually played low volatility casino games for longer periods, which has led to the popularity and expansion of gambling worldwide.
Free Slots Machine
The introduction of slots bonus games has also aided in boosting their popularity thanks to the fact that players can now enjoy not only the chance of winning, but added entertainment and opportunities for rewards within these mini games. In these games, players are generally required to pick something on a second screen (also called a 'pick 'em bonus') and are rewarded accordingly. This feature gives players a sense that they are employing a certain amount of skill and are earning rewards for that. The truth of the matter is that all results are random and there really is no skill behind it, yet still we feel pretty great when we pick the symbol with the highest possible reward.
Add to this the sounds and lights that are incorporated into the game, triggering for even inconsequential wins, and you keep feeling excited and rewarded almost the entire time you play.
One also cannot discount the emotional appeal of these games, which are specifically designed using well-loved and familiar themes and graphics ‐ like those from popular TV series and movies (think the Jurassic Park, Game of Thrones, Wheel of Fortune, Friends and Baywatch slots). The games may all be similar in design, but when we find one with a theme we love, we're likely to play a great deal more than on a slot featuring something that isn't that appealing to us.
As you can see an entire arsenal of psychological programming and consideration goes into slots design. Some will argue that this is unethical and is designed to trap players, but most of us simply acknowledge that it's what makes these games great and keeps us coming back for more. And if you're enjoying yourself and playing responsibly, does all the rest really matter? That's entirely up to you.