Gambling is a calculated risk. People invest money with the view that they could earn a good amount quickly and have fun in the process. There are many stakeholders involved in any casino game. The major ones are the players and the casino. There are different fundamentals and rules to play casino games in different countries. These rules said or unsaid, all have the central idea that the players enjoy, earn money and the casino too, on the other hand, makes money to sustain.
There are different games played with different payout schemes and different hit rate. Games like the slot machine have a fixed payout rate which is not known to the players. In the same manner, there is also a concept of ‘negative expectations’. It is a rather interesting concept at casinos. A negative expectation casino game is a game in which the house has a mathematical advantage. The house has an upper hand over the players. This benefits the house by giving an advantage to the house by decreasing the chances of winning at the game.
Since the negative expectation game guarantees the house of a certain percentage return over the game, the players are at a definite loss in this game. The player may win some rounds in the game initially, but if the game is the negative expectation game, the player would definitely lose at the end.
There are many casino games like blackjack, roulette, craps and keno that have negative expectations. All the major casino games may have negative expectations. Having said that, the standard casino games, like poker games are an exception to the negative expectations. In this particular game, that is Poker, the house is said to earn from the percentage of the pot- meaning that a certain percentage of the table is held for the house.
Negative expectation can also be explained as the ‘house edge’. As gambling is a zero-sum game. A zero-sum game means that the losses and the gains on the table in that game are settled right away. One’s loss is other’s gain. To put it simply, it means that in the game, one player can only win if the other player loses. There is no amount that enters the table from outside. Thus, for casinos to sustain and make some profit, a negative expectation game needs to be there.
Let us understand the concept better. Consider the European wheel game. In this game, there are 36 numbers and a single number- zero. When the wheel is spun, the possible outcomes can be any of the 36 numbers and 0. Thus having 37 total possible outcomes. Mathematically speaking, the chances of winning are 1/37, but the house has the payout scheme of only 35 in 1. This gives the house an advantage of 2.7%. It does not mean that no player would win the game, it simply means that the house has an advantage of 2.7% over the players and thus it would win 2.7% more games than it will lose. This advantage to the casino is guaranteed and is irrespective of the player’s skill, tenure or amount that is wagered.
There is a misconception that in roulette, the safest and an assured way of winning is betting on the black or red. The player perceives that this wager holds 50-50 chances of winning. However, it is not true, because zero is neither black nor red, hence the chances are 18/37 which is 48.37% and not 50%. Thus even the wager on red and black has a negative expectation.
Negative expectations in the game do not mean that the players are bound to lose in the game, it means that the Casino has higher chances of winning than the players have.