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Behavioral Responses to Losses Disguised as Wins: A Field Study of Slot Machine Players

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Abstract

We present the results of a field study examining the effect of losses disguised as wins (LDWs) on subsequent slot machine gambler betting behavior. An LDW occurs when the amount won is less than the amount bet. Using non-experimental, individual transaction gambling data, we examine post LDW betting behavior in a panel of 42,669 gamblers and 17 million slot machine plays. The primary empirical findings include: (1) streaks of three LDWs greater than 75% of the original amount bet lead slot gamblers to increase the amount bet on the next spin; (2) streaks of three LDWs less than 25% of the original amount bet results in gamblers decreasing their bet size on the next spin; (3) slot machine gamblers play faster following streaks of three LDWs compared to losses. We interpret these behavioral findings of differing outcomes associated with small versus large LDWs as consistent with a cognitive dissonance effect (Festinger, 1957). Specifically, the disconnect between the amount “won” (actually lost) and the audio and video stimulus produced by the slot machine highlighting the LDW, produces a dissonance-related arousal that players seek to avoid or reduce leading to changes in betting behavior. Our results complement the experimental findings on LDWs and suggest that the size of the LDW matters in examining the impact on gambling behavior.

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Data Availability

The dataset used for the current study is not publicly available as it contains proprietary information that the authors acquired through private company under the condition of anonymity.

Notes

  1. Most modern slot machines are electronic video game like devices and there are no actual mechanical reels to spin. Nevertheless, we will use the term “spin” to refer to a single trial of a slot machine transaction (i.e., bet/play/outcome).

  2. We also ran the regressions including all break-even outcomes and the results are similar to those reported here with no meaningful differences. These results are available upon request.

  3. This is calculated by taking the partial derivative of the quadratic equation that is estimated and setting it to zero in order to solve for the minimum value of LDW. Here, that is -0.00089 + 2*.000021LDW = 0. Solving gives an LDW of 21.19%.

  4. This represents 9% of the median time between sessions of 149 s, but only 0.8% of the mean time of 1,644 s.

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Authors and Affiliations

  1. Department of Economics, Benedictine University, Chicago, IL, USA

    Florina Salaghe

  2. Department of Economics, University of Nevada, Reno, NV, USA

    Federico Guerrero & Mark W. Nichols

  3. Department of Managerial Sciences, University of Nevada, Reno, NV, USA

    Daniel Jones & James Sundali

Authors
  1. Florina Salaghe
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  2. Federico Guerrero
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  3. Daniel Jones
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  4. Mark W. Nichols
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  5. James Sundali
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Correspondence to Mark W. Nichols.

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Salaghe, F., Guerrero, F., Jones, D. et al. Behavioral Responses to Losses Disguised as Wins: A Field Study of Slot Machine Players. J Gambl Stud 39, 1155–1174 (2023). https://doi.org/10.1007/s10899-022-10184-w

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  • DOI: https://doi.org/10.1007/s10899-022-10184-w

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