Supplying Slot Machines to the Poor

Abstract

As gambling becomes increasingly accessible worldwide, governments face an important policy question: how should they exploit the industry's growth to raise tax revenue while protecting individuals from the detrimental effects of gambling? Using data on slot machines from the largest per capita gambling market in the world, Australia, we estimate a structural oligopoly model to (i) quantify firms' incentives to make gambling accessible among socioeconomically disadvantaged groups and (ii) evaluate the effect of government policy (tax levies, supply caps, and venue smoking bans) on the distribution of slot machine supply, tax revenue, and problem gambling prevalence.