Dangerous Games: The Psychological Case for Regulating Gambling

Charleston Law Review, vol. 8 (2013), 147

NYU Law and Economics Research Paper No. 12-24

37 Pages Posted: 11 Jul 2012 Last revised: 20 Jan 2014

See all articles by Emanuel V. Towfigh

Emanuel V. Towfigh

EBS Law School; Max Planck Institute for Research on Collective Goods

Andreas Glöckner

Max Planck Institute for Research on Collective Goods; University of Cologne

Rene Reid

New York University School of Law

Date Written: March 1, 2012

Abstract

The gambling market is growing rapidly, as is the number of gambling addicts. This is fueling the call for changes in regulation. Some regulators intend to enable the entertainment industry to fully harvest a market potential magnitudes larger than today’s gaming market by minimizing regulation. Others aim at further limiting games to reduce pathological gambling and to enhance consumer protection. Current legal doctrine subjects a game to restrictions if chance, rather than skill, is its predominant trait. This rests on the assumption that only games of chance are harmful. As our experimental study shows, this is wrong: if a notion of skill seems relevant for a game, players fall prey to psychological biases that are breeding grounds for addiction and economic exploitation. We therefore suggest to abandon the distinction between skill and chance, and to condition regulation instead on the psychological biases a game induces, i.e. on the danger it actually poses.

The empirical part of the argument focuses on sports bets which are among the set of particularly controversial games, as there is contention whether skill or chance dominates the performance of bettors. Recent academic papers and court decisions argue that such games are properly categorized as games of skill, and as such should not fall afoul of current gambling laws. We show that, empirically, skill does have an — albeit extremely limited — impact on performance. However, the participants’ general assumption that skill does matter for performance makes them suffer an illusion of control and overconfidence, that as has been established in clinical research makes them highly vulnerable for excessive betting and pathological gaming behavior. We therefore suggest to subject sports betting to regulation.

Keywords: Regulation, Gambling, Sports Bets, Experiment, Overconfidence, Illusion of Control, Addiction

JEL Classification: C91, K23, K32, K42, L83

Suggested Citation

Towfigh, Emanuel V. and Glöckner, Andreas and Reid, Rene, Dangerous Games: The Psychological Case for Regulating Gambling (March 1, 2012). Charleston Law Review, vol. 8 (2013), 147; NYU Law and Economics Research Paper No. 12-24. Available at SSRN: https://ssrn.com/abstract=2103619 or http://dx.doi.org/10.2139/ssrn.2103619

Emanuel V. Towfigh (Contact Author)

EBS Law School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany
+49 621 7102-2253 (Phone)
+49 621 7021-10-2253 (Fax)

HOME PAGE: http://www.lehrstuhl-towfigh.de

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany
+49 228 91416-30 (Phone)
+49 228 91416-930 (Fax)

HOME PAGE: http://www.coll.mpg.de/team/page/emanuel_towfigh

Andreas Glöckner

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

HOME PAGE: http://www.coll.mpg.de/team/page/andreas_gloeckner

University of Cologne ( email )

Richard-Strauss-Str. 2
Köln, 50931
Germany

HOME PAGE: http://soccco.uni-koeln.de/andreas-gloeckner.html

Rene Reid

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
137
Abstract Views
1,398
rank
209,029
PlumX Metrics