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The introduction of a new hotel gaming venue
results in a $0.56 increase in regional
quarterly per capita gaming expenditure. In
other words, redistributing a given number of
poker machines across an additional venue leads
to an increase in per capita gaming
expenditure.
Although gaming expenditure is primarily
affected by EGM numbers, there is also evidence
of a two-way flow, with the number of EGMs being
influenced, in turn, by the amount of
gaming activity. Tests for exogeneity of the
explanatory variable (EGMs) reveal that this
two-way flow has been more pronounced for clubs
in recent years, whilst from 1995 to 1997
it was more pronounced for hotels.
In general terms, the result that EGM numbers
are not independent of gaming expenditure is
intuitive. In individual gaming venues, the
number of EGMs in commission is responsive to
the turnover of existing machines: new machines
may be installed if financial performance
is satisfactory, or else machines may be removed
if profits drop below some benchmark. In
the mid-1990s, gaming machine turnover grew more
rapidly in hotels than in clubs, resulting
in the installation of additional machines. The
empirical results suggest that this effect may
now have abated. The converse is true in clubs,
where the feedback phenomenon appears to
have gathered momentum only recently. This may
reflect the removal of machines from
smaller clubs which cannot satisfy minimum
turnover or profits criteria set by gaming
operators. It is also likely that clubs have
become more mindful of performance standards
and are now promoting EGM use more vigorously.
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