A Note on Variance

mmbt0ne · #1 11-05-2007, 01:28 AM

So apparently despite taking what must obviously be millions of bets over the course of a quarter the winning percentage of a casino can fluctuate by > 50%. This is crazy, and I never would've expected to see something like this.

WSJ blog link

Eventually they get around to saying their win percentage for table games fell to 14.7% in the third quarter of 2007, compared to 23.4% in the third quarter of last year, compared with an expected range of 20% to 22%

Sephus · #2 11-05-2007, 01:46 AM

you think i'm skimming off the top, mike?

Alobar · #3 11-05-2007, 02:19 AM

wow, that seems pretty sick.

Could someone smart in the statistics stuff give some kind of ballpark estimate on what the odds of running that far below expected are?

ArturiusX · #4 11-05-2007, 02:44 AM

I had a friend who used to manage at star city casino, in Sydney. When it first opened, at one point, they had to divert high stake players to Crown casino, because they were becoming underrolled and the swings were killing them. This amused me, but I wouldn't be surprised if it was common place.

ike · #5 11-05-2007, 03:03 AM

I didn't read all the nitty-gritty details, but couldn't this have something to do with patrons playing more lower house edge games and less slots? If everyone played blackjack and played well their % edge would be way less than even the 14% they apparently got. surely with the kind of volume they get they're not actually running this far below expectation.

edit: i guess if some megawhales accounted for a very large percentage of the casino's action over only a few bets they could run this bad...

Josem · #6 11-05-2007, 04:37 AM

[ QUOTE ]
i guess if some megawhales accounted for a very large percentage of the casino's action over only a few bets they could run this bad...

[/ QUOTE ]

I'm fairly confident that this is right.

After all, if the largest casinos are hosting punters who are are gambling up to $200k per box, and playing six boxes of BJ (ie, $1.2million per hand) and your quarterly profit before one-time items is $120million or so, it doesn't take much for the high rollers to get lucky and put a hole in your earnings.

SNOWBALL · #7 11-05-2007, 07:51 AM

they're running at almost their exact expectation in terms of bets won/lost
It's just that the bet sizes are what is screwing them up, with people martingaling or hitting and running for huge sums.