Government restrictions and the demand for casino and parimutuel wagering

Abstract

Growth in casino wagering in the United States from the mid-1980s forward has been extraordinary. Over the same period, however, parimutuel wagering has declined. Concern for this decline has prompted a number of states to allow parimutuel racetracks to offer casino-type gaming devices at their facilities. Such operations are commonly referred to as ‘racinos’. If the gaming devices at a racino are under the auspices of a state lottery, they are referred to as video lottery terminals (VLTs). Separate parimutuel and VLT wagering demand models were estimated for a racino facility. A number of restrictions were imposed on the VLT's at the beginning of the study period including: number of VLT's, type of game and machine, maximum bet per play and VLT location. The effect of these restrictions on VLT and parimutuel handles was a major focus of this article. Also of importance was an examination of the relationship between the VLT and parimutuel products. Relaxation of government restrictions on the VLT's was found to have resulted in a large increase in VLT wagering. On the other hand, parimutuel wagering was found to decrease with the relaxation of restrictions on the VLT's. The presence and growth of the VLT product was found to decrease parimutuel handle. The presence and growth of the parimutuel product was found to increase VLT handle.