March 2010 – Payback Percentage and Problem Gaming: A Critical Review of the Literature

Prepared by Dr. Jonathan Parke, The Gambling Lab Limited

Aims and Scope

To provide an overview of empirical evidence and relevant literature regarding the relationship between payback percentage and problem gambling. This required the systematic identification, review and synthesis of the extant relevant literature. The examination of the potentially relevant economic literature was beyond the scope of this current review.

Methodology

Electronic databases and specialist online libraries were searched for relevant literature using a comprehensive set of keywords relating to payback percentage and gambling and problem gambling. Information was also gathered from web-based search engines and professional and informal networks within the gambling field including any relevant unpublished literature which may inform the review.

Key Findings

Thirteen studies were reviewed including key-informant research studies, laboratorybased studies and studies which examined actual gambling behaviour. No empiricallybased research study directly considered the impact of payback percentage on problem gambling specifically but only gambling behaviour more generally. Other research informed by views from key informants and computer simulation did specifically consider impact on problem gambling.

All experimental studies and studies using secondary data of actual gambling behaviour found that differences in payback percentages under 100% did not have a significant effect on playing behaviour within a single session. One study examining data over an extended observation period found weak negative correlations between payback percentage and level of real gambling expenditure per EGM1 (i.e. real expenditure per EGM increased as payback percentage fell).

There was evidence for differences in payback percentages over 100% having an impact on gambling behaviour however methodological limitations and limited use of payback levels over 100% in real world situations restrict the application of this finding.

Key informants expressed strong support for the view that payback percentage was unimportant relative to other game parameters in determining problem gambling. Payback percentage consistently rated as one of the least important factors in the key informant research. There was less consistency and conviction among key informants regarding exactly how payback percentage may affect gambling behaviour.

Research using a computer simulated EGM game demonstrated that players on average win more frequently, win larger sums of money and experience more ‘bonus-mode entries’ under the 98% payback percentage version relative to the 85% version. However, it was supported by one research team that, while 98% represents better value prima facie,such differences could increase the risk of problem gambling because the potential impact of an ‘early big win’ among novices or the development or maintenance of cognitive biases such as the illusion of control. These claims were not based directly on empirical evidence and the limitations and counterarguments to these claims were considered.

Key Conclusions and Implications

Based on this current review, there is inadequate evidence from which to form the basis of any definitive regulatory policy regarding the appropriate controls of payback percentage to prevent and minimise gambling-related harm.

The research in this review had significant limitations including inappropriate sample sizes, poor levels of ecological validity, limited range and levels of payback percentage being observed, limited focus on problem gambling and no focus beyond EGM gambling in an offline context.

With specific reference to EU law and regulatory policy the restriction of the provision of online gambling, with a view to protecting the customer on the basis of levels of payback percentage is not justified at this time based on the evidence considered in this review. Attempts to control levels of payback percentage in the absence of scientific evidence may invite criticism that such decisions are being driven by agendas other than consumer protection.

There may be less ambiguous aspects of payback percentage to focus initial regulatory efforts such as transparency to players, de-mystification and consistency of payback levels across same versions of the game.

1 Electronic gaming machine

For further information, please contact EGBA at egba@egba.eu

Please see link also to an economic briefing on the link between payback percentage and problem gaming by David Forrest
Professor of Economics, University of Salford, UK