No house edge games. What's the business model?

Mr. Flibble

I remember that this came up before here but I don't remember any decent explanation.

What's the deal with no house edge games? http://promo.betfair.com/casino/lp1/index.asp for instance. Do they just use them to lure players to games where they have an edge?

BigCityBanker

variance sucks them to zero and they retire due to lack of bankroll before it has the chance to spin them back to break even.

those who win initially think its great and due to the inevitable sicko tendancies they wait to be brought back to break even/losing players.

also lure to other games.

ITT-Pat

gambler's ruin

Mr. Flibble

I can't see how that holds up though. From the house's POV they just accept bet after bet - the spin of the wheel doesn't care where the bet came from so I don't see how gambler's ruin explains it.

Perhaps if there was no table limit (but the punter still had limited funds) this would hold up, but I just can't see how it would make money otherwise.

jonnner

Is the Gamblers degeneracy not the Casino's edge?

ITT-Pat

I can see where you're coming from with the house just accepting bet after bet, as if 10,000 players place x amount of bets then over 10000x spins the house should break even.

But as each person probably has discipline problems, the amount of players who go busto and dont have a chance to recoup their losses, usually outweighs the amount of players who leave with the game with a few bob

edit: having re-read this:

Mr. Flibble wrote: »

Perhaps if there was no table limit (but the punter still had limited funds) this would hold up, but I just can't see how it would make money otherwise.

i think i may have just explained something that you already know:o

SuperHans

Also for some of the games such as blackjack you need to be using perfect strategy for the house edge to be zero. A lot of punters wouldn't be doing this.

Drakar

I've always been interested to know what percentage of deposits are just left in the account eg if the depositor dies, or forgets about it, or does it when he's drunk, or gets put in jail, forgets password and can't be bothered faxing signed copies of his passport and credit cards across the world etc.

RoundTower

lol at it being "gamblers ruin" especially from someone who is meant to understand gambling

what the OP said is closer to the truth, they may end up playing other games.

Mellor

They are most likely lying

BetdaqPokerMgr

edit

Drakar

Damn for 4 minutes I bet we had the answer.

Mr. Flibble

Drakar wrote: »

Damn for 4 minutes I bet we had the answer.

I'm not so sure. There was more talk of gamblers ruin and I just don't see it. Can anyone show me any maths proving the gamblers ruin theory?

Mellor

RoundTower wrote: »

lol at it being "gamblers ruin" especially from someone who is meant to understand gambling

what the OP said is closer to the truth, they may end up playing other games.

RT, I'd agree with you that the common form of gambler's ruin doesn't apply. And most people prob refered to this.
But gamblers ruin can refer to three different theories. Two of which could apply here.

Mr. Flibble wrote: »

I'm not so sure. There was more talk of gamblers ruin and I just don't see it. Can anyone show me any maths proving the gamblers ruin theory?

Fibble, the most common form of gamber's ruin doesn't apply. That is;
That a player playing a negitive EV game will eventually go broke.
Doesn't apply for obvious reasons

But the two others are:
That a player who increases his bet when he wins, but doesn't drop it when he loses will eventually go broke.
and
That a gambler with finite wealth, playing a fair game (zero edge both sides) will eventually go broke against an opponent with infinite wealth.

There are two different maths proofs for the second. One should account for the fact that Betfair would have finite money.
Although, I don't fully think that the second applies. There would be that tiny tiny chance that betfair go busto, acceptable risk, i'm not sure. They could however, limit accounts to get over this.

RoundTower

Mellor wrote: »

That a player who increases his bet when he wins, but doesn't drop it when he loses will eventually go broke.

I don't think this is necessarily true, it's only true when he increases his bets faster than a certain rate. It doesn't make a difference to betfair's bottom line anyway.

That a gambler with finite wealth, playing a fair game (zero edge both sides) will eventually go broke against an opponent with infinite wealth.

This is what I understand by gambler's ruin. It doesn't apply here. Basically the house has to have actual infinite wealth (at least, far more than all its punters put together) and be able to play actually forever for this to be relevant.

The tiny chance that Betfair go busto? They'd still have a chance of going busto even if they had a 1% edge on all their bets.

ITT-Pat wrote: »

I can see where you're coming from with the house just accepting bet after bet, as if 10,000 players place x amount of bets then over 10000x spins the house should break even.

But as each person probably has discipline problems, the amount of players who go busto and dont have a chance to recoup their losses, usually outweighs the amount of players who leave with the game with a few bob

how can you show that you understand it perfectly in your first paragraph and then get it so wrong in your second paragraph? Yes, for betfair accepting 10000 bets from 10000 punters is just the same as accepting 1000 bets for 1 punter. If more people go bust than leave with money (which is very likely the case) that just means the people who leave with money leave with proportionally more of it.

Mr. Flibble

So is it fair to say that any of the definitions of gamblers ruin may occur, but none of them affect the overall profitability of the betting site. The only profitability for the betting site comes from getting people playing other games, players playing sub-optimal play and taking a playing/withdrawal fee?

BetdaqPokerMgr

My edit previously said that you have to pay comission on all winning bets but I removed it as wasn't sure and I can't test right now.

Anyone care to check if commission is charged on zero blackjack winning bets either after each hand is played or at point of leaving the table?

Commission is definitely charged on Xchange blackjack and other games.

BigCityBanker

exchanage blackjack is (tehnically) a p2p game so its comission charged like all p2p markets.

zero roulette etc are not p2p games.

Is a bot a person?

RoundTower

Mr. Flibble wrote: »

So is it fair to say that any of the definitions of gamblers ruin may occur, but none of them affect the overall profitability of the betting site. The only profitability for the betting site comes from getting people playing other games, players playing sub-optimal play and taking a playing/withdrawal fee?

also perhaps interest on the money deposited, though that probably doesn't cover their payment processing costs. but yes, it's a loss leader.

Mellor

RoundTower wrote: »

I don't think this is necessarily true, it's only true when he increases his bets faster than a certain rate. It doesn't make a difference to betfair's bottom line anyway.

Its true that a small increase can be maintained when winning if a profit margin is big enough. Ie, the average increase over N bets, is smaller than the EV of a single bet.

But remember this is a zero edge game. Neither you or the house has an edge, if you increase your bet everytime you win, you will go broke.
The EV here is 0. Eventually you will be bettign at a level where variance will bust you

You have $10,000 online.
And place a $10 bet on black, repeatedly. Every time you win you up it by $1. What do you think your profit is after 1000 spins. What are you betting on the next spin.
What about 10,000 spins, what about now?

This is what I understand by gambler's ruin. It doesn't apply here. Basically the house has to have actual infinite wealth (at least, far more than all its punters put together) and be able to play actually forever for this to be relevant.

I already noted that betfair have finate wealth in my last post.
So Huygens theorm applies, which is the chance of a player busting, given bankrolls. The problem do you count betfairs roll here as the sum of all players in the game. (as they can pay out all the winners, with all the losers, on average).
Besides, I have already said I don't actually think this applies to the above.
The chance they have of going busto is inversally proportional to their bankroll. Which means its still a zero net EV game.

The tiny chance that Betfair go busto? They'd still have a chance of going busto even if they had a 1% edge on all their bets

The 1% edge means that the chance is less than the loss. So its +EV, key difference.

Just to be clear, I'm just pointing out that there are other versions of GR that are more relevant that the common one. Only the top one is +EV for betfair. The second one isn't.
These aren't spread to be winning games for betfair, just advertising tools.

RoundTower

Mellor wrote: »

Its true that a small increase can be maintained when winning if a profit margin is big enough. Ie, the average increase over N bets, is smaller than the EV of a single bet.

But remember this is a zero edge game. Neither you or the house has an edge, if you increase your bet everytime you win, you will go broke.
The EV here is 0. Eventually you will be bettign at a level where variance will bust you

You have $10,000 online.
And place a $10 bet on black, repeatedly. Every time you win you up it by $1. What do you think your profit is after 1000 spins. What are you betting on the next spin.
What about 10,000 spins, what about now?

this really isn't important -- even if you don't up your bet you would eventually go broke. We already know - 1. that you will go broke if you keep increasing your bet (so long as you increase it by enough) even if you have an edge, 2. that you will go broke if you keep betting the same amount at a zero edge game. But you're trying to prove you will eventually go broke if you keep increasing your bets at a -ev game, this is utterly trivial.

RoundTower

Mellor wrote: »

I already noted that betfair have finate wealth in my last post.
So Huygens theorm applies, which is the chance of a player busting, given bankrolls. The problem do you count betfairs roll here as the sum of all players in the game. (as they can pay out all the winners, with all the losers, on average).

I think what really matters is people's attitude towards "free money". Someone who would not ordinarily play an online casino is tempted to play one of the zero-edge games because he knows they are zero edge. He spins up his $100 into $1000 (as one in ten people will do if they keep playing long enough). Then he decides to withdraw $500 and bet on the ponies with the "free money", it's not as if he's gambling his own hard earned money, right?

Mellor

RoundTower wrote: »

this really isn't important -- even if you don't up your bet you would eventually go broke. We already know - 1. that you will go broke if you keep increasing your bet (so long as you increase it by enough) even if you have an edge, 2. that you will go broke if you keep betting the same amount at a zero edge game. But you're trying to prove you will eventually go broke if you keep increasing your bets at a -ev game, this is utterly trivial.

What are you talking about. Where did I once mention a -ev game???

My comments was in relation to

RoundTower wrote: »

I don't think this is necessarily true, it's only true when he increases his bets faster than a certain rate.

The certain rate doesn't exist in a zero edge game, any increase, even against a finite house, will lead to busto.

Meh, at this stage your probably leveling. or pretending to.

RoundTower wrote: »

I think what really matters is people's attitude towards "free money". Someone who would not ordinarily play an online casino is tempted to play one of the zero-edge games because he knows they are zero edge. He spins up his $100 into $1000 (as one in ten people will do if they keep playing long enough). Then he decides to withdraw $500 and bet on the ponies with the "free money", it's not as if he's gambling his own hard earned money, right?

Agree completely.
As I said, these games are just advertising tools.

RoundTower

Mellor wrote: »

What are you talking about. Where did I once mention a -ev game???

I assumed you meant roulette but rereading I guess you meant 0-ev roulette. not levelling at all.