casinos; competition; spatial analysis; prices
Gaming Law | Industrial Organization | Regional Economics
Original Research Article
The expansion of casinos in the Mid-Atlantic States has been motivated by the quest of states to capture the economic and tax revenue benefits of the new industry. The expansion of casinos and the increase in competition, however, has had an impact on revenue growth and prices. This study examines the impact of expansion on the casino revenues in the region from 1997-2012, and the price for gaming in Pennsylvania and New Jersey from 2006-2012. A spatial econometric model was employed to examine the net impact of casino revenues from expansion. Spatial econometrics captures the within state impact of expansion but also estimates the impact on neighboring states. As expected expansion within one state lead to a significant decline in revenues of the neighboring states. Net estimates are given. Data gathered on wagers, payouts and promotional plays suggest that competition in Pennsylvania of new casinos has led to lower prices in the state, and the entry of Pennsylvania into the casino market has led to lower prices in New Jersey. Consumers have gain by the expansion in lower prices, but the benefits of tax revenues from gaming has slowed.