internet gambling, online gaming, instrumental variable, ARIMA
Original Research Article
This study estimates the effect of the online gaming industry on the commercial casino gaming industry. The findings from this study suggest that during the pre-UIGEA period, online gaming was a moderate substitute good for brick and mortar gaming in the U.S. During this early period in the online gaming market, which was characterized by loose regulation and relatively easy access, online gaming revenue is estimated to have cannibalized commercial casino revenue at a rate of 27 to 30 cents on the dollar. A discussion of this finding’s relevance to the current gaming market and the related policy considerations is provided. This study also led to the discovery of a seemingly valid instrumental variable, internet user rates, which can be used to correct internet gaming coefficient estimates for potential bias in future studies.