The House Edge

The house advantage is why casinos open their doors and offer games of chance. It’s responsible for their profits. It’s how they make money on client bankrolls.

Last year, casinos on the Las Vegas strip made more than $6 billion in revenue. Clearly, the house advantage is a successful tactic casinos use to make money.

Definition of House Edge
The simplest definition I’ve come across is that it is the casino’s profit expressed as a percentage of each wager.

The house edge exists to guarantee a profit for the casino, which in turn Mahadevbook download enables them to offer big payouts and other goodies.

Any wager you place comes with a probability of gaining and a probability of losing.

For example, a wager on the turn of a coin results in a 50% chance of winning on a bet of heads and a 50% chance of winning on a bet of tails.

Because the odds for each outcome are 50%, this is termed an even-money bet. You have every reason to wager one way as the other, and your prospects of winning on either bet are identical.

How do casinos transform propositions like the one above into a profitable business? They don’t pay genuine odds.

Imagine the coin-flip scenario above, except you were paid $0.98 every time you win instead of the $1 you wagered. The other $0.02 go to the person flipping the coin.

Those two cents are, in this instance, the house edge.

They represent the difference between the wager’s genuine odds (1 to 1) and the odds offered you by the casino (0.98 to 1).

What Is Payback Percentage?
Payback percentage is directly related to house margin. In fact, it’s pretty much a mirror image of it.

You’ll see return percentages most often in the area of the casino set aside for slot machines.

In fact, I don’t believe I’ve ever seen it used on any other game, except other gambling machines, like video poker.

Rather than promote a machine as having a “5% house edge,” casinos found success by describing that game as having a “95% payback percentage.”

Presenting the game in terms of the player’s bankroll rather than in terms of the casino’s advantage makes the game seem more player-friendly.

Though payback percentages are most-often used on slot machines, it’s simple to take any game that you know the house edge for and present it in terms of payback percentage.

For example, a standard-rules game of blackjack performed according to perfect strategy will result in a house edge of about 0.5%. Flip that number around, and that game of blackjack suddenly offers a “99.95% payback percentage.”

A Note on Casino Advantage and Payback Percentage
I want to take some time out to talk about an essential aspect of this concept that is easy to overlook.

The house edge is a theoretical figure based on the rules of the game and an infinite number of game outcomes.

A slot machine with a 98% payback percentage presumably won’t take exactly 2% of your money after you play for ten or fifteen minutes.

Payback percentages and house edge statistics are long-term assessments of a game’s probabilities.

It is all too common for streaks to occur in luck-based sports. A streak of three losses in a row will really throw off your concept of a games payout percentage unless you grasp that payout percentages are theoretical.

Things get even complicated when you look at games with a skill element, such as blackjack or video poker.

For these games, the casino’s advantage will vary based on your aptitude.

A halfway-decent card counter will be playing with better odds at the blackjack table than a player loosely following a strategy card he purchased at the gift shop. And that man, the one at least attempting to play with strategy, will have better odds than a player betting solely on instinct and emotion.

How Does the House Edge Affect Me?
The most apparent way you’re affected by the casino’s advantage – it’s the mechanism by which the casino takes your money.

If you opened a casino tomorrow paying out genuine odds, you’d go broke. Unless you established an awesome steakhouse or something on the property and used gambling as a loss-leader. But that’s an extreme circumstance, isn’t it?

The casino’s advantage transforms your $100 into an hour’s worth of slot machine play and a couple of free beers. Each pull of that slot machine shaves a minuscule amount off your bankroll.

For every dollar you wager on a double-zero roulette wheel, you stand to win back $0.94.


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