Gambling: Mapping the American Moral Landscape

5 Behavioral and Brain Measures of Risk-Taking

115 5 Behavioral and Brain Measures of Risk-Taking ♠ Rachel T. A. Croson, Matthew Fox, and James Sundali Gambling is America’s favorite pastime by volume. The total amount won from gamblers in the United States in 2006 was over $57 billion. To put that number in perspective, the total sales for movie tickets and music recordings was around $20 billion, and the combined sales of McDonald’s, Burger King, Wendy’s, and Starbucks was about $28 billion in 2006. Furthermore, revenues from gambling are growing at an average of 10 percent each year, as shown in the bottom row of table 5.1. As recently as 1978, casino gambling was available in just one state of the United States, but by 2001, thirty-three states allowed the practice in one form or another.1 The growth in gambling activity is not just in the United States. In recent years, 82 percent of Canadians participated in some form of legalized gambling,2 and the hottest destination for new casinos is the island of Macau. To a mathematician, the popularity of casino (and lottery) gambling is puzzling. The expected value of the gambles offered to individuals is clearly negative, yet the activity is approached, experienced, and treated with such enthusiasm that one cannot help but wonder what gamblers are thinking when they undertake 116 Rachel T. A. Croson, Matthew Fox, and James Sundali Table 5.1 U.S. Casino Industry Gaming Revenues (in millions of dollars) Revenues (MIL. $) % Change 2003 2004 2005 2006 2003–4 2004–5 2005–6 Nevada/Atlantic City, total 14,114 15,369 16,667 17,841 8.9 8.4 7.0 Nevada total 9,625 10,562 11,649 12,622 9.7 10.3 8.4 Las Vegas Strip 4,760 5,334 6,034 6,688 12.1 13.1 10.8 Atlantic City 4,488 4,807 5,018 5,219 7.1 4.4 4.0 Western towns, total 768 804 839 872 4.6 4.4 3.9 Deadwood, SD 70 78 84 90 10.9 7.7 6.9 Colorado 698 726 755 782 4.0 4.1 3.5 Other land-based, total 1,412 1,509 1,458 1,641 6.9 -3.4 12.6 New Orleans 282 320 229 338 13.5 -28.4 47.8 Detroit 1,130 1,189 1,229 1,303 5.2 3.3 6.1 Riverboats, total 10,232 10,626 10,636 12,065 3.9 0.1 13.4 Iowa 694 727 747 1,173 4.7 2.8 57.0 Illinois 1,710 1,717 1,799 1,924 0.4 4.8 6.9 Mississippi 2,700 2,777 2,468 2,570 2.9 -11.1 4.1 Louisiana 1,566 1,562 1,676 2,229 -0.3 7.3 33.0 Missouri 1,332 1,473 1,532 1,592 10.6 4.0 3.9 Indiana 2,230 2,370 2,414 2,577 6.3 1.9 6.7 Native American casinos 16,826 19,408 22,510 25,080 15.3 16.0 11.4 ToTal 43,352 47,716 52,110 57,499 10.1 9.2 10.3 Source: Reprinted from Basham and Mathis, Casino and Hotel Analysts, page 1. Behavioral and Brain Measures of Risk-Taking 117 theserisks.3 Furthermore,individualsoftensimultaneouslyengage in risk-taking activities like gambling and risk-avoiding activities like purchasing insurance. This confluence raises the question of whether individuals understand the risks (and rewards) associated with gambling (or with insurance purchases), and the extent to which they reason rationally about them. As a result of these puzzles, a significant amount of research has been done surrounding gamblers and the thought processes that lead them to engage in risky activities. Our goal is not to review this entire body of research, which would be the subject of a book in and of itself. Rather, we have identified a few areas of interest where a body of research exists and where behavioral regularities have been identified that speak to the question of why, and how, people gamble. First, we discuss data from individuals participating in gambling decisions, either data collected from gamblers in the field or from laboratory studies that were described and framed as gambling decisions. Next, we review data from the lab designed to investigate the psychological processes underlying gambling decisions...