Vegas Rules

So Levitt and I were in Las Vegas this weekend, doing some research. (Seriously.) We had a little downtime and we decided to play blackjack. It was New Year’s Eve, at Caesars Palace, about 9 p.m. We sat down at an empty table where the dealer, a nice young woman from Michigan, was very patient in teaching us the various fine points that neither of us knew and which indicated that we were both inexperienced. Keep one hand in your lap, e.g. When you want a card, just flick your cards twice on the felt. When you’re standing, tuck one card under your chip/s. And so on.

At one point, Levitt kind of gasped. He had had 21 but somehow had asked for another card. The last card was a 2. It wasn’t that he didn’t know how to play, or count; he was just distracted — talking to me, he’d later claim — and the dealer had seen him do something, or fail to do something else, that indicated he wanted another card. So here he was with 4 cards: a face card, a 4, a 7, and a 2. The dealer looked sympathetic. I vouched for Levitt, told her he wasn’t an idiot and surely wouldn’t have hit on 21 intentionally. She seemed to believe us. She said she’d call over her supervisor to see what could be done.

She called the supervisor’s name over her shoulder. I could see the supervisor, and I could see that he couldn’t hear her. Remember, this is a casino on New Year’s Eve; it was pretty noisy. She keeps calling, and I keep seeing that he’s not hearing her, but she won’t turn around to call him. That would mean turning her back on her table full of chips and, even if Levitt was dumb enough to hit on 21, he presumably was smart enough to grab a bunch of chips and run. (Or maybe, she was thinking, he’s actually dumb like a fox and used this hitting-on-21 trick all the time, to get the dealer to turn her back on the table.)

Finally I went over and got the supervisor. When he came over, the dealer explained the situation. He seemed to accept Levitt’s explanation. Then he looked at me. “Did you want the card?” he asked, meaning the 2 that Levitt drew.

“Well, now that I see it, sure I want it,” I said. I had 17; I certainly wouldn’t have hit on 17, but a 2 would give me a lovely 19.

“Here,” he said, and gave me the 2. “Happy New Year.”

Then the dealer took a card and busted.

I don’t know much about gambling, but I do know that the next time I’m in Vegas and feel compelled to play some blackjack, I’m going to Caesar’s.

And just so you don’t think that Levitt really is a complete gambling idiot: the next day, we sat down at the sports book and he grabbed a Daily Racing Form and studied it for about 10 minutes and then went up and placed a bet. He found a horse, going off at 7/2, that had never run a race. But he saw something that he liked. He bet the horse to win and win only. And then we watched the race on one of the jumbo screens. It took a good 60 seconds for his horse to settle into the gate — we thought it would be scratched — but then it got in and the gates opened and his horse led wire to wire. It was a good bit more impressive than his blackjack.


mhertz

Hehe, great stories!

Matt

This is a great example of incentives, also known as "customer service". The supervisor made a decision that maximized revenue to the casino in (at least) two ways:

1) Nearly all players lose at Blackjack in the long run. As long as you're not cheating or counting, you will be a source of profit to the casino. Levitt's play made it appear more likely that you were in that category. By keeping you happy, you'll more than likely keep coming back. The risk to the casino (

joel

Didn't the 2003 NY Times Magazine article Dubner did on Levitt discuss Levitt having a formula for winning at horse racing?

It seems like Levitt saw a horse going off at 7-2 that had never run before and thought, "somebody knows something."

Stephen J. Dubner

Joel:

Yes, the 2003 article did discuss Levitt's horse-racing formula/s. What I should have written in the blog post is that the race he bet on was a maiden race: none of the horses had won previously.

jasoncain

Any dealer that would give you a card when you are showing 21 without telling you is probably closer to losing their job than getting a pat on the back from the casino. I've played enough casino blackjack to know that the dealer will always tell you how much you have and advise you for and against taking cards if you look like you don't know what you're doing. Of course that's assuming both cards are showing like in most casinos.

Stephen J. Dubner

Jasoncain,

No, the cards weren't showing. We were playing single-deck.

Jesse

Stick to horses

Princess Leia

Hmmmm... was it top secret research or can you tell about that?

sophistry

There was also some funny business involving Caesar's recently:

http://www.lasvegastribune.com/20050624/headline2.html

Ken D.

Casinos have a tricky problem with 21. They want customers to have a sense that it is a game of skill, the better to receive their money. Played within its basic rules, unfortunately, it really is a game of skill, unlike roulette or slots, in which a sufficiently skilled player has the advantage over the house. Thus the strange added rules like no card counting -- "Don't you dare actually pay close attention and really try to win!" They keep tweaking the rules to block the use of skill, while still trying to keep the game's image. At least they are well paid for their efforts.

mike529

The thing is that the cost on any one hand is much less than the loss of goodwill. This demonstrates why the free market doesn't encourage cheating and mistreating your customers (and why government monopolies do just that).

mathking

Monopolies do have a tendency to encourage, or at least not discourage, cheating. Non-governmental ones much more so than governmental ones, since governmental monopolies do have accountability to the voters.

Free markets absolutely don't discourage cheating. Mistreating customers sure, but cheating is an action that can give you an advantage (if you are not caught) or disadvantage (if you are caught).

qualityg

SJD,

A good "Michigan" Dealer always knows an honest face in Vegas. However,if you guys are in Detroit for the Super Bowl stay away from the Detroit Casinos, they would have thrown you out. Try the Windsor Casino. So is Levitt predicting the Steelers in the Super Bowl. Go Bus!

qg

qg

mike529

Cheating is not in heneral efficient because you're tlaking about a high risk to a generally low reward.

Phil

How much were your bets, if you don't mind me asking? I'm just curious as to how much the burst of good will cost Caesar's.

J T

Sorry to hijack the thread, but it's timely subject in my state (MD) as slots are being considered.

I just read Freakonomics thanks to my nephew. Couldn't put the book down.

Coincidently I'm arguing with another blogger on his blog and he keeps referring to a letter by a Dr. James Dobson that contains "the irrefutable claim from social scientists that state-sponsored gambling guarantees an 8 to 1 revenue loss to treat the ills wrought upon the lower classes."
See -
http://www.family.org/docstudy/newsletters/a0005556.cfm

After reading Freakonomics my skepticism about everything increased 4 fold. I'm not quite sure how to prove that statistically, so you'll just have to accept it as gospel.

Reading the letter by Dobson I see no specific reference to this claim (8 to 1 blah blah blah). Am I missing something?

Anyway, I'm suspicious about Dr. Dobson's agenda and wondered if the Levitt or Dubner had any comments on the matter. Or anyone else.

Read more...

dschnelldavis

As a Las Vegas resident and U of C Economics alumnus, I'm sorry I missed the chance to meet you guys when you were in town.

I moved to Las Vegas about ten years ago to become a professional gambler (don't laugh - I was very young at the time) and soon learned that professional gambling is really just a specific form of "applied ecomonics."

For example, the economic concept of Expected Monetrary Value (EMV) a professional gambler would just call Expected Value (EV), and the EMV/EV formulas are something every professional gambler should be able to do in his head, since they are what he almost literally lives and dies by all day, every day.

I gave up my aspirations of professional gambling a long time ago (turns out I'm just a tiny bit risk averse, and a true professional gambler must be completely risk neutral), but I still think Las Vegas is a GREAT town to do economics in. In addition to the casinos, we've got all kinds of other interesting industries, like prostitution and ticket scalping, not to mention all sorts of crazy incentives designed to manipulate tourists.

Hope you come back soon (and feel free to gamble more next time - it helps keep our taxes low! :)

Read more...

MarketingMonger

All Hail Caesar's Palace - How to Earn a Customer for Life in 30 Seconds or Less

The authors of Freakanomics recently wrote about a great customer service experience they had at Caesar's Palace in Las Vegas. This type of experience executed everyday is what builds great brands. The manager had no idea who the guys were...

mhertz

Hehe, great stories!

Matt

This is a great example of incentives, also known as "customer service". The supervisor made a decision that maximized revenue to the casino in (at least) two ways:

1) Nearly all players lose at Blackjack in the long run. As long as you're not cheating or counting, you will be a source of profit to the casino. Levitt's play made it appear more likely that you were in that category. By keeping you happy, you'll more than likely keep coming back. The risk to the casino (