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ORIGINAL PAPER
Using Neural Networks to Model the Behaviorand Decisions of Gamblers, in Particular,Cyber-Gamblers
Victor K. Y. Chan
Ó
Springer Science+Business Media, LLC 2009
Abstract
This article describes the use of neural networks (a type of artificial intelligence)and an empirical data sample of, inter alia, the amounts of bets laid and the winnings/lossesmade in successive games by a number of cyber-gamblers to longitudinally modelgamblers’ behavior and decisions as to such bet amounts and the temporal trajectory of winnings/losses. The data was collected by videoing Texas Holdem gamblers at a cyber-gambling website. Six ‘‘persistent’’ gamblers were identified, totaling 675 games. Theneural networks on average were able to predict bet amounts and cumulative winnings/ losses in successive games accurately to three decimal places of the dollar. A moreimportantconclusion is thatthe influence of agambler’s skills, strategies, and personalityonhis/her successive bet amounts and cumulative winnings/losses is almost totally reflected bythe pattern(s) of his/her winnings/losses in the few initial games and his/her gamblingaccount balance. This partially invalidates gamblers’ illusions and fallacies that they canoutperform others or even bankers. For government policy-makers, gambling industryoperators, economists, sociologists, psychiatrists, and psychologists, this article providesmodels for gamblers’ behavior and decisions. It also explores and exemplifies the usefulnessof neural networks and artificial intelligence at large in the research on gambling.
Keywords
Neural network
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Gamblers’/Cyber-gamblers’ behavior and decisions
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Successive bet amounts
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Cumulative winnings/losses
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Gamblers’ fallacies
Introduction
Gambling, or gaming as it is also known, is a human activity that can be traced back through prehistory and a multitude of gambling forms are apparent in many differentcultures (Dewar2001). Gambling is often claimed to have positive effects, in that not onlyis it a lucrative and profitable industry worldwide in its own right, worth billions of US
V. K. Y. Chan (
&
)School of Business, Macao Polytechnic Institute, Rua de Luis Gonzaga Gomes, Macao,People’s Republic of Chinae-mail: vkychan@ipm.edu.mo
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J Gambl StudDOI 10.1007/s10899-009-9139-7
dollars per annum (American Gaming Association2008b; Moss et al.2003), but it also
fuels tourism (MacLaurin and MacLaurin2003), employs a considerable amount of laborat different skill levels (Gill et al.2006; MacLaurin and MacLaurin2003; Siegel and
Anders1999), and is a major source of government revenue in many economies (Gill et al.2006; Layton and Worthington1999; Siegel and Anders1999). Unfortunately, gambling is
coupled with a series of negative socio-economic problems. For example, it financiallyafflicts low-income individuals (Layton and Worthington1999). Furthermore, there isevidence that certain forms of gambling create pathological gambling (alternatively knownas compulsive gambling, addictive gambling, disordered gambling, or problem gambling)through addiction, lead to suicide, attract criminal elements, foster corruption (Feigelmanet al.2006; Layton and Worthington1999; Friedman et al.1989) and facilitate money
laundering (Hugel and Kelly2002).The total impact and incidence of both the positive contributions and the negativeproblems have been intensified by the advent of cyber-gambling on the internet in the mid-1990s, given that cyber-gambling makes gambling substantially more prevalent and per-vasive in society by essentially relaxing the constraints on gambling times and venues (Gillet al.2006). In particular, with regard to alleviating the related problems, whilst traditionalterrestrial gambling is subject to strict legal and governmental regulations enforced withinthe associated jurisdictional boundaries, cyber-gambling renders these restrictions rela-tively unenforceable because of the absence of boundaries in cyberspace. In summary,cyber-gambling scales up both the contribution and the problems of gambling. As a matterof fact, cyber-gambling has been growing since its inception in 1995 (American GamingAssociation2008a; Dewar2001) and the magnitude of its annual turnover worldwide is
now tens of billions of US dollars (American Gaming Association2008a; Dewar2001)
with nearly 23 million people having gambled at well over 2,000 cyber-gambling websitesas of 2005 (American Gaming Association2008a).Given such a conjunction, namely that the gambling industry is already a multi-billiondollar industry and still rapidly expanding, in particular, as a result of the speedy prolif-eration of cyber-gambling websites and cyber-gamblers in the last decade, how to strike abalance between gambling’s contributions and problems has been undeniably controversialboth socio-economically and politically (Smith2004; Layton and Worthington1999).
Needless to say, both the contributions and the problems of gambling depend on gamblers’behavior and decisions, in particular, their bet amounts and their temporal trajectory of cumulative winnings/losses. Specifically, on the one hand, gambling’s contributions to thegambling industry’s profit, the industry’s employment and government revenue are directlyderived from gamblers’ bets and losses. On the other hand, gambling’s problems withregard to the gamblers’ financial affliction, pathological gambling, and possible suicidestem outright from the gamblers’ cumulative losses. Therefore, gamblers’ bet amounts andtheir temporal trajectory of cumulative winnings/losses become one of the determinants of the aforementioned gambling-related controversy. In the face of this controversy, modelsfor gamblers’ bet amounts and their temporal trajectory of cumulative winnings/losses canassist the work of related government policy-makers, gambling industry operators, econ-omists, sociologists, psychiatrists, and psychologists. In particular, such models helpgovernment policy-makers in reformulating related government policies and putting for-ward new legislation to regulate the gambling industry in a bid to secure sufficient gov-ernment revenue while at the same time containing gambling-related problems (AmericanGaming Association2008a; Smith2004; Hugel and Kelly2002; Dewar2001; Jones et al.
2000; Siegel and Anders1999). Such models also enable gambling industry operators and
their employees to reposition and redesign their games so as to optimize the profit and thus
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guarantee employment (Moss et al.2003). At the same time, economists and sociologistscan better estimate the socio-economic value of the gaming industry based on the infer-ences provided by such models regarding bet amounts and cumulative winnings/losses,whereas psychiatrists and psychologists can better chart the behavior and decisions of gamblers according to such models so as to improve the treatment and rehabilitation of pathological gamblers (Ladouceur et al.2007; Gill et al.2006; Nelson et al.2006; Slutske
et al.2003,2005; Breen and Zimmerman2002; Layton and Worthington1999).
This article documents research on aforesaid models based on neural networks or, moreexactly, artificial neural networks, which are a type of artificial intelligence emulatingbiological neural networks (Nikolaev and Iba2006; Ananda Rao and Srinivas2003; Arbib
2003), used to model the aforementioned bet amounts and temporal trajectories of cumulative winnings/losses. Such neural networks were and needed to be trained by anempirical data sample on the amounts of bets laid and the winnings/losses made in suc-cessive games by each of a random sample of cyber-gamblers. The data sample wascollected from a legally licensed, well-established cyber-gambling website (sometimesreferred to as an e-casino) where international gamblers played Texas Holdem among otherpoker games. This research aimed at letting the neural networks construct the followingtwo models:
•
M1: the model for successive bet amounts, which longitudinally models and thuspredicts the bet amounts in the successive game laid by each individual Texas Holdemgambler based on his/her winnings/losses in a number of immediately preceding gamesand his/her current gambling account balance.
•
M2: the model for the temporal trajectory of cumulative winnings/losses, whichlongitudinally models the temporal trajectory of cumulative winnings/losses of eachindividual Texas Holdem gambler based on his/her cumulative winnings/losses in anumber of immediately preceding games.Despite the fact that Texas Holdem games are more than games of chance in that theoutcomes depend on gamblers’ intellectual decisions, which, believe it or not, in turn aregenerally thought to depend on individual gamblers’ skills and even strategies (Harringtonand Robertie2004), it was to the author’s surprise that the neural network for M1 upontraining turned out to be able to predict a gambler’s bet amounts in successive gamesaccurately to more than three decimal places of the dollar on average for each of the sixgamblers in our data sample across the board. More importantly, the neural network for M2upon training was also able to track the temporal trajectory of a gambler’s cumulativewinnings/losses, i.e., successively predict the gambler’s cumulative winnings/losses, with asimilar accuracy again for each of the six gamblers in our data sample across the board.Undoubtedly, considering the structure of the two neural networks, which will be elabo-rated on later in the article, the above findings empirically strongly suggest that theinfluence of a gambler’s skills, strategies, and personality on his/her successive betamounts and cumulative winnings/losses is almost totally reflected by the pattern(s) of his/ her winnings/losses in the first few initial games and his/her gambling account balance.These conclusions at least partially invalidate gamblers’ various illusions and fallacies(Clotfelter and Cook 1993), as detailed in the subsection ‘‘Economic/Psychological
Models’’ below, that they can outperform other gamblers or even bankers (e.g., casinos,cyber-gambling websites, etc.) For gamblers, the implication is that it is not worthwhile toexcessively and endlessly experiment with their skills, strategies, and personalities in anattempt to outperform other gamblers or even bankers. For casinos and cyber-gamblingwebsites, the implications are that their profits can be better maximized through
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