CASINO GAMBLING

AS LOCAL GROWTH
GENERATION:
ABSTRACT
Over the past decade, casino gambling has become increasingly
popular as a local economic development strategy. This article makes
the case that using gambling as an economic development tool
presupposes a rather different economic development “game” from
that tradi- tionally played. While the introduction of gambling into a
community might induce the same short- run effects (local jobs and
incomes) as the introduction of any other economic development
project, the economic development processes at work are very
different. This article compares the way the economic development
game is traditionally played to the way it is played “in reverse” when
ca- sino gambling is used as the tool. The main differences are in the
areas of community-corporate relations, fiscal versus economic
impacts, market development, the role of government, and the
provision of public goods. In light of these differences, distinctions in
strategic behavior are drawn. Empirical evidence from Indiana is used
to analyze the economic development game as played in the traditional
setting of corporate recruitment and in the context of casino gambling.
The conclu- sions point to some of the factors that constrain a
community from fully maximizing its negotiating advantage as a
resource holder.
Offering incentives to attract economic development activity is part of
the “prisoner’s dilemma” in local economic development. Cities and
states collectively would be better off if there were voluntary cooperation
and regulation of incentives. However, in practice, cooperation between
communities is an intractable solution because jurisdictions cannot be
assured that their competitors in fact will cease
their activity (i.e., the prospect of “cheating”). This dilemma also runs
through the individual eco- nomic development instruments.
Collectively, community development would improve if communi- ties
would avoid pursuing the same projects, such as science parks, malls,
office development, airline maintenance centers, manufacturing facilities,
and sports teams. But they cannot afford to do so for fear that competing
communities will gain an advantage in job growth, tax base growth,
and/or po- litical prestige. In such a competitive model, communities are
players who compete for economic development projects and jobs (i.e.,
resources). While the assumption of rational behavior would lead us to
expect an outcome in which players do not bid away more than they
expect to gain, the dynam- ics of the process are such that this result
cannot be assured. It should be noted that this is not to endorse a
monopoly situation over a competitive one. It is simply to state that in a
competitive en- vironment, public officials can in fact find themselves
unwittingly “giving away the store” and ex- periencing the “winners
curse.” This is further underscored by the very high discount rates that
economic development officials under political pressure find themselves
applying to projects.
 This is often the case with respect to casino gambling. Localities are
pressured to introduce gam- bling, especially if neighboring jurisdictions
are operating casinos that feed off their local market. A community
might feel compelled to introduce gambling as a reactive strategy if it
believes that it is losing voluntary tax revenue to neighboring states.
Although all localities might prefer not to promote casinos, they might
nevertheless engage in this activity for fear of defection or cheating on
the part of an individual jurisdiction. In this context, the prisoner’s
dilemma explains the interregional spread of gambling in much the same
way as other economic development instruments (Thompson & Gazel,
1997). Competing communities can be viewed as players whose
collective action is responsible for the distribution of casinos. Local
governments cannot afford to voluntarily opt out of this competitive
environment because of the strong incentive to defect on the part of
other local governments.
While casino gambling might develop in a context similar to that of
traditional economic devel- opment, this article argues that it
presupposes a rather different economic development game to that
traditionally played. Whereas much effort has been expended in
quantifying the local and regional costs and benefits accruing from
gambling (Borden, Fletcher, & Harris, 1996; Gazel, Thompson, &
Rickman, 1995; Grinols & Omorov, 1996; Leven, Phares, &
Louishomme, 1998), less attention has been focused on the economic
development processes at work. In this article, we constrast the tra-
ditional economic development game with the game played in the case
of casino gambling. We make the argument that in many respects,
gambling illustrates economic development “in reverse.” With respect to
casino gambling, communities are not players but are, in fact, resource
holders. In contrast to the traditional economic development model,
corporations chase communities for licenses rather than communities
chasing corporations for projects, plants, or jobs. We then examine the
strategic behavior of corporations and communities in traditional
economic development settings and contrast it with behavior in a
gambling setting. We use empirical evidence from Indiana from both
gambling and traditional economic development contexts (competition
over corporate recruitment) in order to illustrate the reversal of roles in
the gambling setting. While the community acts as a resource holder in
the latter case, certain constraints mitigate its ability to fully exploit its
negotiating position. We conclude with an examination of the limits to
community bargaining in this setting.

PLAYING THE GAME

In some respects, the introduction of a casino into a community induces
many of the short-term responses that can be expected from any new form
of economic activity. On the supply side, a large producer surplus is likely
to be generated as casino operators reap super profits in a new market.
Over time and with competition, this surplus is likely to diminish as the
market saturates and producers are able to extract only a small economic
rent. On the demand side, the introduction of gambling into a community
is likely to induce a large consumer surplus as gambling becomes
available to a subpop- ulation that previously was denied access to this
good. Again, this is likely to dissipate over time. It should also be noted
that gambling often is a package that includes eating and entertainment as
well as wagers. Willingness to pay for gambling therefore might be a
 composite expression of these other forms of consumption as well. As
such, the consumer surplus arising from the introduction of gam- bling
may be an overstatement.

Like many other forms of economic activity, gambling generates both

negative and positive ef- fects. The negative effects and their real
magnitude are the subject of much debate (Scott, Johnson, & Mia, 1996;
University of New Orleans, 1997). Because of the externalities that
surface in the form of gambling addiction, social dislocation,
pathological behavior, and productivity loss, gambling at- tracts much
more attention than other forms of entertainment. From a national
perspective, these externalities impose a cost to nongamblers. From the
perspective of the industry, these costs are passed on to society. Thus,
private and public benefits are hardly symmetrical. Total societal costs
in this instance are comprised of both the private costs and the
externality costs.
The positive effects are the economic and fiscal benefits attributed to the
casino in the form of new investment, new tax sources, and the like
(Evart, Treptow, & Zeitz, 1997). Again, there is little sym- metry
between the private benefits and the externality benefits. From a local
development perspec- tive, the objective is to maximize the total private
benefits and the positive externality benefits while minimizing or
exporting all of the negative externalities. If gambling acts as a pure
“export” sector, servicing nonlocal demand, then additional new
economic activity that is generated locally by the nonlocal populations
that frequent the casino is captured and all negative externalities are
transferred back with these populations to their points of origin. In this
respect, gambling demonstrates little difference from any other economic
development activity.
The cost-benefit analysis of the positive and negative effects often
leads to the conclusion that the components of the total social benefit
arising from the casino are not of the same magnitude. Invari- ably,
however, the situation arises whereby total private benefits to a casino
from locating in a com- munity are of a very different order from the
external benefits to the community resulting from hosting the casino.
Again, this situation is similar to the experiences of localities with other
local economic development instruments such as automobile plants and
convention centers (Fenich, 1994; Marvel & Shkurti, 1993; Milward &
Newman, 1989).
Even in the case where the introduction of a casino leads to a change
in the state of the local economy—for example, an increase in local job
opportunities—this might not be an indication of an improvement in
local economic welfare (Courant, 1994). Again, this is common to other
local eco- nomic development instruments. Local economic
development projects, and casinos in particular, often count jobs or local
tax revenues as indices of local economic development. However, if the
advent of a casino causes no change in the local income distribution,
replaces existing jobs with casino employment, or creates employment
opportunities that are filled by outsiders and commuters, very little
change in local economic welfare takes place (Persky, 1995).
Another oft-mentioned feature of state-sponsored gambling is that it
functions as a regressive tax on the poor because gambling expenditures
make up a larger proportion of their incomes than of the rich. Gambling
is often used as a way of raising public revenues, therefore, the poor
unwittingly fund services for the rich (Gross, 1998). The
counterargument is that this is a voluntary tax on a voluntarily
consumed good. Low-income people will always consume voluntary
goods in a disproportionate ratio to their income, by virtue of their
being defined as “poor.” Voluntary spending on other forms of
entertainment or consumption can have equally regressive tax outcomes.
Tax regressivity on a vol- untary good is, therefore, more a case for
abolishing the tax than for banning the good (Walker, 1998). This
argument further underscores the commonality between gambling and
other forms of economic activity.
Casino development fits the traditional economic development model
in two additional respects. First, economic development activity is built
upon high visibility. For political purposes, progress should be obvious
(Blair & Kumar, 1997). Economic development practitioners often are
under pres- sure to produce visible results, especially given the fact that
their work may not be fully institution- alized within the local
bureaucracy. Second, recent evidence suggests that economic
development practitioners operate according to a very short time frame
and adopt a very high discount rate for projects (Loveridge, 1996). This
means that they prefer economic development programs that have a
short gestation period and show rapid results, even if they are high risk.
Economic development practitioners look for immediate results and
discount the future very heavily. Casino gambling cer- tainly fits these
two features.
Therefore, in many respects, casino gambling reflects several of the
characteristics of the tradi- tional economic development game.
However, one major difference exists: Government creates and regulates
the market for places. In this industry, governments hold the key to the
valued resource (licenses) for which corporations compete. This “limited
site” approach to promoting gambling is the dominant form of state
policy with respect to the industry. Though the unlimited site approach
adopted by other states such as Nevada and Mississippi might attract
more attention, the constrained access model that is examined here and
adopted by states such as Indiana, Illinois, and Missouri, is the
mainstream policy model at the state level. In the unlimited model entry
and exit are easy, licensing fees are low, and gambling tax rates vary
from 3% to 7% percent of revenues. In the limited site model, entry is
regulated, licensing fees are higher, and gaming taxes can reach 20% of
revenues.
By creating restricted property rights in this area, a scarcity value
results. Although governments routinely are involved in this kind of
practice through the statutory planning system, in the case of casino
development, failure to regulate the market exposes governments to
future social costs that may result from gambling, such as social
pathologies, bankruptcies, and family disorders. This is hardly the case
in the traditional economic development setting even when governments
exert regu- latory powers through environmental controls and zoning
ordinances.
In the standard economic development setting of corporate
recruitment, a contrasting structure emerges. Corporations hold the
valued resource (employment) and communities compete against each
other in a market for jobs (Blair, Fichtenbaum, & Swaney, 1984). This
turns the tables on how the economic development game is played with
respect to casinos. It is to this issue that we now turn.
 PLAYING THE GAME IN REVERSE
The role of government is a key factor in understanding how the
economic development game regarding casinos is played in reverse.
Government creates a regulated environment because the mar- ket
cannot be trusted to operate efficiently. In the traditional economic
development model, the fail- ure of the private market to deal with
externalities, provide public goods, or mitigate the existence of
information asymmetries leads to a government presence that reduces
over time as the market starts to operate efficiently (Bartik, 1990).
In the case of casino-based economic development, the opposite
situation often occurs. Govern- ment enters the market to promote
efficiency and then increases its role over time. In contrast to the market
for jobs model, there is an increased demand for further regulation in the
market for places as the gambling market matures. This is motivated by
the desire to maintain market share and limit competition. Once granted
licenses, casino operators clamor for restrictions on the granting of li-
censes to new locations in order to protect their own markets. This has
been the case with respect to competing border locations such as
Northern Indiana, Northeast Illinois, South Ontario, and East Michigan
(Deloitte Touche, 1995; Przybylski & Littlepage, 1997).
The role of government in this sector is different in two additional
respects. First, public interven- tion places government in the role of
promoter of a particular sector or economic activity. When government
intervenes in the financial capital market by providing subsidized loans,
this reflects a desire to promote a certain activity by, for example, small
businesses or high-technology industries. In this respect, government
takes on an implicit promotional role. In the case of the gambling indus-
try, creating a regulated environment means that government takes on a
dual—and ambiguous—role. On the one hand, it assumes the mantle of
promoter of the industry; on the other hand, it attempts to protect the
public from the severest excesses of an economic activity that it has
promoted (Goodman, 1995). This is a role that government does not
generally assume in other economic development projects such as
shopping centers and small firm assistance. However, in the case of
gambling, this role is inevitable.
As such, government’s role in gambling promotion may be considered a
second-best form of eco- nomic activity. This means that government
activity is characterized by attempts to compensate for previous
(government-created) distortions or inefficiencies. By adding casinos to
the bundle of avail- able gambling-based goods and by releasing any
latent demand for casino gambling that may exist, government then
finds itself intervening in order to counteract some of the adverse effects
arising, as well as to limit the number of licenses to ensure profitability.
In order to justify this role, governments often try to link casino
development to other “higher level” forms of activity. Thus, the casino
be- comes an instrument for creating jobs, expanding the tax base, and
attracting new investment.
Aside from the role of government, we identify four additional areas in
which gambling mirrors traditional economic development. These are:
(1) community-corporation asymmetries; (2) incon- gruence between
fiscal and economic impacts; (3) provision of public goods; and (4)
economic de- velopment strategy alternatives (redistribution versus
import-substitution versus export-based). Each issue is discussed in the
sections that follow.
 Community-Corporate Asymmetries

In traditional economic development, communities recruit

corporations. The players in this game are the communities that engage in
competitive bidding for the prize. As noted above, in this prisoner’s-
dilemma situation, communities are forced to compete even if it means
offering more than the ex- pected benefits from the prize (Ellis &
Rogers, 1997).
There are many asymmetries in this game, however. The corporations
control the rules. They re- lease information about the size of the prize,
the bidding rules, and the competitors, according to a time-frame that
meets their strategic needs. Communities respond with bids based on
imperfect in- formation. Moreover, many communities do not possess
the analytic capabilities needed to translate their bids into a coherent
accounting framework (Persky, Felsenstein, & Wiewel, 1997).
Communi- ties often are unaware of the implications of the offers that
they are making or of the magnitude of the prize that they hope to win.
In contrast, under gambling-based economic development,
corporations chase communities. Here, the localities hold the valued
good (gaming licenses) and the players are the corporations. Again,
communities are locked in a prisoner’s dilemma in that many may prefer
not to promote gambling but must play the game in the absence of any
alternative collective solution.
This game is more transparent than the traditional model. As the
community creates the gaming environment, the rules of the game
generally are known in advance. Proposals are solicited publicly, criteria
for consideration are communicated, relative weightings are publicized,
and the reasons for the final outcomes usually are made known (Long,
Clark, & Liston, 1994). All players are known to all competitors which
creates less ambiguity than in the traditional game. Even though
information asymmetries still exist between the corporation and the
community in terms of professional assis- tance and evaluation capacity,
these are not a structural characteristic of the game.

The Provision of Public Goods

In traditional economic development, competitive bidding can lead to

misallocation of resources and insufficient expenditures on public
goods. This is one of the classic justifications for market failure-based
public intervention (Bartik, 1990). Though this is true at the aggregate
level, it might be less defensible at the local level due to the openness of
local economies. When governments provide public goods, there is still
no guarantee that the public goods will serve the local population.
Thus, from a local economic development perspective, the most
desirable public goods are those that stim- ulate local activity, for
example, public infrastructure that complements the activity of a private
producer. The situation is somewhat different with respect to bidding for
gaming licenses. Government- created public goods such as
infrastructure improvements are appropriated by either the casino op-
erators or by the individual gamblers (Goodman, 1995). If the latter are
nonlocals, this represents an outflow from the local economy. The same
also is true with respect to the casino operators, who in most cases are
national corporations with no local roots. Thus, there is very little gain
for the local community despite the fact that government granted the
gaming licenses in order to assist the locality in the first place.
Ironically, the public goods that serve the local population often are
extracted in the bargaining process as the community expands its
demands to include other nongambling-related goals
(see below).

Choosing an Economic Development

Strategy

Export-based theory has guided much of the thinking behind the

traditional model of economic development, which views nonlocal
demand as the driving force behind economic growth (Tiebout, 1962).
This basic activity is expansionary in nature and serves to stimulate the
nonbasic sector of the local economy, which generally is redistributive
in nature. Expansionary growth can emanate from two sources: export
activity or import substitution. Export activity generally is considered
preferable as it involves generating wholly new demand in the local
economy. Import substitution involves diverting local demand and
retaining local demand that might have flowed outside. In general, both
of these strategies are preferable to pure redistribution, which involves
no additional local economic activity.
In standard economic development activities, a basic distinction often
is drawn between these two strategies. On the one hand, there are
projects that serve local sources of demand. These are assumed to
engage in pure redistribution, or displacement, of existing activity. On
the other hand, there are projects that serve nonlocal demand. These,
therefore, are assumed to generate wholly new activity and generate an
expansionary impact.
This distinction often does not hold in the case of casino-led economic
development, however. In this case, a casino serving nonlocal demand
can be engaged in simple redistribution and displace- ment, especially if
nonlocal gamblers have fixed budgets and low income elasticities of
demand (Per- sky, 1995; Przybylski, Felsenstein, Freeman & Littlepage,
1998). Conversely, a casino serving local demand does not need to
displace existing demand, especially if local demand for gambling
would have left the locality in the absence of the casino. In this case, the
casino is engaged in import sub- stitution rather than displacement,
despite the fact that it is serving local demand.
This analysis is supported by the few empirical studies that have
examined these issues (Deloitte Touche, 1992, 1995; Leven et al., 1998;
Persky, 1995). Some of these studies have shown that be- tween 59%
and 62% of demand served by new casinos is based on import
substitution (Deloitte Touche, 1992, 1995). Thus, even though casinos
often are promoted as export-based activities gen- erating wholly new
demand in the region (the traditional model of economic development),
in prac- tice, much of their activity is grounded on import substitution.
Furthermore, in the case where they serve fixed budget, nonlocal
demand, they might in fact be displacing existing demand and generat-
ing a purely redistributive effect in the local economy.

Fiscal and Economic Impacts

In the traditional form of economic development, communities are

players competing in a market for jobs, and the locality often is prepared
to offer incentives in order to secure the prize ( jobs, in- vestment, etc.).
In so doing, the community will offer tax breaks, subsidized
infrastructure, soft loans, worker training programs, and the like, all of
which might result in a fiscal deficit. The community is prepared to
sacrifice short-term fiscal stability for the prospect of longer term
economic growth as measured by more jobs, rising incomes, and so
forth.
With the gambling-led model of economic development, the outcomes
often are reversed. In this game, the corporations are the players that
compete in a market for places. Corporations bid via giveaways, lump
payments, corporate gifts, and one-time contributions in areas that are
ancillary to gaming, for example, recreational and cultural facilities (see
below). This is in addition to paying sales, income, and property taxes
and a fixed percentage of revenues. The outcome of the game can be
local fiscal gain with little economic development. On the one hand, this
situation is likely to bolster local fiscal stability in the short run. On the
other hand, we can postulate situations where there is little economic
development in terms of change in local employment and income levels
over the medium to long terms. This can result when the economic
activity generated by the casino is purely redistributive, serving either
fixed budget nonlocal (tourist) demand or displacing local de- mand.
Empirical evidence on the relative weights of fiscal versus economic
impacts is ambiguous (Borden et al., 1996; Grinols & Omorov, 1996;
Rephann, Dalton, Stair, & Isserman, 1997).
 THE PLAYERS’ BEHAVIOR: EMPIRICAL
EVIDENCE OF COMMUNITY AND
CORPORATE STRATEGIES

This section examines the strategic behavior of the players in the

traditional economic develop- ment game and contrasts it with the
strategic behavior of the players when economic development is led by
gambling. In both games, the resource holder that controls the prize is
pitted against players who want control of this resource and are willing
to bid for it.
The stages of the games are outlined in Table 1. The strategy of the
resource holder follows the framework described by Nunn, Klacik, and
Schoedel (1996) in their analysis of inter-city competi- tion for airline
maintenance operating centers. For our purposes, this is taken as an
economic devel- opment game in the traditional mold. The strategy of
the players essentially is reactive. It parallels the initiative undertaken by
the resource holders. Although both the traditional and gambling-led
eco- nomic development games roughly follow these five stages, the
internal composition of each stage differs. The various stages of the
game in both of its variants are described below.
The two variants of the economic development game are described
empirically as they relate to Indiana. The traditional game relates to the
case of the inter urban competition over the recruitment of a United
Airlines maintenance operating center that eventually located in
Indianapolis. The reverse economic development game is described in
relation to the granting of the license for riverboat gam- bling in
Evansville, Indiana. Each type of game is analyzed in accordance with
the chronological framework in Table 1. Data for both case studies were
developed from extensive fieldwork and cor- porate interviews (Center
for Urban Policy and the Environment, 1995; Nunn et al., 1996).

Stage 1

In the traditional game, the resource holder establishes the ground

rules. The size of the prize and the potential benefits to the players are
made known. Basic criteria for entering the competition are

TABLE 1

Community and Corporate Behavior in the Local Economic

Development (ED) Game

RESOURCE HOLDERS PLAYERS

In the traditional ED In the traditional ED
game = corporation In the game = community In the
gambling game = gambling game =
community corporation
VE
STAGES 1) ESTABLISH GROUND ENVIRONM
OF THE RULES ENT
ECONOMI • size of prize • information
C • benefits to players asymmetries
DEVELOP • criteria for participation • simultaneous playing
MENT 2) CREATE 3) INCREASE
GAME COMPETITI LEVERAGE
 • tactical strategic considerations
maneuv 1) ANTICIPATE
ering RESOURCE
• reveal HOLDER’S
hidden CRITERIA
agendas • assemble “package”
• expand • establish “baseline”
to conditions
secondar 2) PRESENT
y areas PLAYERS AS
4) FINALIZ MEETING
E BIDS CRITERIA
• fine- • stress positive
tuning factors and
• short- efficiency gains
listing 3) ANALYZE OTHER
and PLAYERS
ranking • information gathering
of • rationalizing agreements
players
4) OUT BID OTHER
5) ASCRIB PLAYERS
E • losers’ embarrassment
OUTCO • visible results & time
ME TO: frame
• operatio • “winners curse”
nal +
 scenario
5) ASCRIB
E
OUTCO
ME TO:
• package
released, although players usually are not aware of their relative
importance to the resource holder. In reaction, the players try to
anticipate the importance of the publicized criteria to the resource holder
and assemble a package of incentives likely to enhance the
attractiveness of their offer/bid. As a guideline, the players try to
establish baseline conditions that they assume provide a reasonable re-
sponse to the ground rules that the resource holder dictates.
In the case of gambling-based economic development, while the above
format generally is pre- served, certain differences might emerge. First,
the resource holders are likely to give a clearer indi- cation of criteria for
participation and their relative importance. Second, while establishing
the ground rules, the resource holder (the community) often is explicit
about the secondary objectives that it anticipates will materialize
through the granting of the license. Third, the community, and not the
corporation (the player), is likely to construct minimum conditions in
order to provide a yardstick for comparing different offers. These
differences all emanate from the more transparent game that is played
when the resource holder is a public jurisdiction and not a private
corporation.
The empirical evidence for the first stage of the traditional economic
development game began in 1989 when United Airlines (UAL)
requested proposals for the location of a $500 million, 7,000-job,
maintenance operations center (MOC) facility. In its introductory letter,
UAL revealed the value of the prize and identified the basic components
that would be evaluated in order to determine the lo- cation. The
negotiating team made known the magnitude of the prize in terms of
investment, jobs, wages, and operations, but left it to the competitors to
establish the economic and fiscal benefits to be derived from the MOC.
It listed but did not rank the criteria that the final site should meet.
Cities were told that quality of life issues, site readiness, operational
factors, construction costs, state and local tax structure, and incentive
packages were important to UAL. However, it was not clear which of
the criteria were the most critical.
The “reverse” economic development game began in 1993 when the
state of Indiana legalized riverboat gambling for a total of 10 licenses on
Lake Michigan and the Ohio River. Each county had to approve gaming
with a local referendum and, except for Lake County, each was limited
to one boat. For Evansville, the first stage of the game began in earnest
before the referendum passed in Vanderburgh County, with the city of
Evansville issuing a request for proposals (RFP) in which it listed two
possible sites for consideration, both of which were city-owned. The
RFP indicated that any infrastructure improvements needed for this
project were expected to be borne by the developer and set up minimum
requirements (e.g., 1,000-passenger boat, 250-room hotel). The RFP
also listed five city-supported public-private initiatives. The city defined
the evaluation criteria, ranging from financial stability and amount of
total investment to plans for sufficient parking, but did not indicate what
relative weight would be given to each component. Evansville officials
received proposals from seven gaming companies, that were presented
to the public at a press conference, followed by a question and answer
period. After the referendum passed, Evansville hired Deloitte and
Touche to estimate a generic boat’s activity. The firm estimated the
number of passengers likely to attend, the average loss per patron, and
costs related to boat admission, hotel, parking, etc. This information
gave the city a baseline of information from which to compare the
reasonableness of the applicants’ estimates and determine the market
conditions for Evansville. Finally, the mayor appointed a 21- member
Evaluation Committee that included elected officials, appointed
officials, economic devel- opment professionals, and a representative of
the Citizens Against Riverboat Gambling.

Stage 2

A salient feature of the traditional economic development game is the

asymmetrical flow of infor- mation between the resource holder and the
players. The latter often are bidding in the dark, a situ- ation on which
the resource holder tries to capitalize. Players are uncertain about such
matters as the criteria that are important to winning the prize; the
incentives that are important to the resource holder; the real cost that
they will have to bear resulting from bids they are offering; the other
players in the game; and the bids other players have offered. The
resource holder increases this asymmetry by
playing the economic development game with a variety of players
simultaneously. In response, the players try to impress the resource
holder with the positive outcomes likely to arise from winning the prize
and the efficiency gains to be reaped.
In contrast, the gambling-led game is characterized by far fewer
information asymmetries at this stage. Legally determined time frames
and the requirement of public disclosure generally create a greater flow
of information. With the community acting as resource holder, the
corporation is not subject to arbitrary “deadlines” and postponed “final
decision dates” in order to embellish the com- petitive atmosphere.
Information asymmetry can exist, however, in the case where the
gambling cor- poration has access to analytic and market information
that is far superior to that available to the community. This reverse flow
of information can mean that the player is able to impress the positive
impacts of the casino on the local economy and downplay the negative
impacts without being ade- quately challenged.
For the corporate recruitment case, Stage 2 commenced with a
concerted effort on the part of UAL to create a competitive
environment. Incentive packages were proposed that started at
approximately
$100 million. UAL conveniently created deadlines, and the incentive
packages grew as cities bid against each other without knowing what the
other sites were offering. When a deadline was reached at the end of
1990, neither UAL nor the competing cities revealed selected details of
the competitors’ incentive packages. Soon the deadline moved to June
1991, and the incentive packages were approx- imately $200 million.
The iterations of this negotiation continued until UAL perceived that the
risks of continuing were greater than the reward.
At the second stage in the gambling case, the resource holder chose
those players meeting the criteria outlined in Stage 1 while stressing
future efficiency gains. The decision was limited by the Indiana Gaming
Commission’s self-imposed timeline. The six chosen companies (Aztar,
Jumers, Evans- ville Landing, Station Casinos, Rivercity, and Players)
were asked to make a presentation to the Eval- uation Committee.
Subsequently, the city issued a Request for Modifications and
Enhancements to the original proposals and set up another round of
presentations. After deliberation and discussion, the Evaluation
Committee chose the top three proposals (Aztar, Jumers and Players) to
enter into negotiations with the city of Evansville.

Stage 3

At this stage in the traditional game, additional corporate objectives

are announced. Releasing these hidden agendas is another corporate
strategy for increasing leverage with the players. In this way, the
corporation is able to extract additional incentives from the community
that are unrelated to the pri- mary economic activity. The players try to
respond with attempts to rationalize contractual agreements (e.g.,
clawback clauses). In addition, they try to improve the flow of
information by gathering infor- mation on other communities that are
bidding for the prize and the size and composition of their offers.
The main contrast in the case of gambling is that tactical maneuvering
of this sort can be avoided at this stage. This is because the
community’s agenda often is revealed at an earlier stage. For this
reason, many of the secondary benefits extracted need not be justified as
tangentially related to the main economic development project. In the
traditional model, both resource holders and players try to establish this
link (however contrived), generally for reasons of political expediency.
In the case of the United Airlines MOC, Stage 3 saw UAL in Denver
successfully increasing le- verage by linking the MOC negotiation to
hub location and extracting hub incentives as part of the MOC package.
Once the corporate objective was achieved, UAL reopened the MOC
negotiations and set a new deadline.
At the third stage in the casino case, many of the incentives extracted
from the applicants were related directly to picking the best applicant.
Rationalizing the agreements, however, was easier in some cases than in
others. For example, even though a case could be made that renovations
to the Vanderburgh auditorium and Victory Theater were related to the
project, donations of $200,000 to the United Way and $250,000 to the
Pigeon Creek Greenway clearly were not.
 Stage 4

At this stage, players fine-tune their bids and the resource holder
releases a short list of those players who still are in the game. This
usually is an indication to the players of a last opportunity to finalize
their offers. Players now are aware of who their competitors are but still
do not know what bids they have made. In the traditional game, this is
the final chance for communities to outbid the competition and avoid the
embarrassment of becoming a losing location. As communities operate
according to a short (politically dictated) time frame, this is an important
issue. For the same political reasons, the ability to demonstrate visible
results and win the prize are important. This is the stage, therefore,
where players often can reach oversubsidization and the game becomes
zero-sum (Blair & Kumar. 1997). This occurs when the players offer a
package with a value that is greater than the amount needed to reach the
desired economic development goal (for example, creating 1,000 new
jobs). In this case of the winners’ curse, the players overpay compared
to the benefits they expect to receive.
In contrast, the corporation does not suffer any embarrassment from
losing a particular location. In addition, a financially stable corporation
is under no pressure to produce visible results, and its time frame for
decision making is not governed by elections. This also is true in the
gambling-led model, in which the corporation is a player and not a
resource holder. Losing a location to a competing corporation in this
instance simply is part of the business environment. Thus, when the
roles are reversed as in the gambling case, players feel less pressure.
In the case of the MOC facility, the fourth stage was characterized by
a concerted effort on the part of the resource holder to finalize the
player’s bids. The June deadline, set as a maneuvering tactic in the
previous stage, passed without a decision and the competition narrowed
to four cities: Denver, Indianapolis, Louisville, and Oklahoma City. The
competitors were growing impatient with the pro- cess, and public
opinion was turning against UAL. If the process dragged on, UAL ran
the risk that competitors would drop out. In response to this pressure,
UAL brought all four competitors to Chi- cago for a day of negotiations.
All four competing cities were aware of the other cities but negotiated
with UAL privately. In this manner, UAL sought to create the ultimate
bidding environment—the simultaneous game. The pressure on the
competing cities to raise their bids grew, and the situation permitted
little time for analysis. Denver stood firm, Oklahoma City increased its
offer by $30 mil- lion, Louisville dropped out, and Indianapolis upped
its offer by approximately $80 million. It ap- peared to be time to make
the final decision because each competitor had put forward its best offer.
However, UAL was not finished, and a few days later a UAL attorney
flew to Indianapolis and told negotiators that they had 24 hours to
increase the value of their package by $85 million.
In the casino case, the city hired a professional negotiator to assist
with stage four negotiations. There were two rounds of negotiations with
the companies, each of which was attended by the pro- fessional
negotiator, the mayor, and staff. During this process, each applicant was
asked a set of questions, and the answers helped determine the rankings.
Question topics included project financ- ing, management capability,
and the role of public-private initiatives.

Stage 5
 In the traditional game, once the choice is made and the prize awarded,
the outcomes are ascribed by the various parties in a manner according
their role in the game. The resource holder will ascribe the outcome to
operational and strategic considerations of the corporation. Incentives
and induce- ments will not be mentioned. In contrast, the community
that has landed the prize will ascribe its success to the package of
incentives that it assembled.
In the gambling model of economic development, these rationale often
are reversed. The commu- nity will stress the additional benefits it has
extracted from the winner and will play down the way in which
gambling fits into the community’s development strategy. In contrast,
the corporation will de-emphasize the package that it is giving to the
community for fear of facing charges of bribery. Instead, it will stress
the way that locating in the community complements corporate
strategy.
In the traditional economic development game, Stage 5 was reached
on October 23, 1991. The state of Indiana, the city of Indianapolis, and
the Indianapolis Airport Authority agreed to the terms,
and UAL made a final decision nearly one year after the original
deadline. The city of Indianapolis and the state of Indiana won a heated
competition that had involved more than 90 competitors.
In the casino-based game, Aztar Corporation was selected and a
project agreement was negotiated. The Evaluation Committee was
presented with a summary of the negotiation process and the project
agreement and proceeded to unanimously ratify the selection.
Evansville’s license was awarded to Aztar, the city’s endorsed
candidate, on February 10, 1995. In Indiana, almost all of the localities
granting gambling licenses endorsed an applicant with a process
similar to that described above. Each of the gaming companies that
applied for a permit offered additional incentives to local gov- ernments.
These ranged from an additional 3% of gross revenue (in the case of the
Trump casino in Gary, Indiana) to building new market-rate housing (as
was the case with Showboat casino in East Chicago, Indiana).
SOURCE CODE
//Learnprogramo-programming made simple
#include <iostream>
#include <string> // Needed to use strings
#include <cstdlib> // Needed to use random numbers
#include <ctime>
using namespace std;

void drawLine(int n, char symbol);

void rules();

int main()
{
string playerName;
int amount; // hold player's balance amount
int bettingAmount;
int guess;
int dice; // hold computer generated number
char choice;

srand(time(0)); // "Seed" the random generator

drawLine(60,'_');
cout << "\n\n\n\t\tCASINO GAME\n\n\n\n";
drawLine(60,'_');

cout << "\n\nEnter Your Name : ";

getline(cin, playerName);

cout << "\n\nEnter Deposit amount to play game : $";

cin >> amount;

do
{
system("cls");
rules();
cout << "\n\nYour current balance is $ " << amount << "\n";

// Get player's betting amount

do
{
cout <<playerName<<", enter money to bet : $";
cin >> bettingAmount;
if(bettingAmount > amount)
cout << "Your betting amount is more than your current balance\n"
<<"\nRe-enter data\n ";
}while(bettingAmount > amount);
// Get player's numbers
do
{
cout << "Guess your number to bet between 1 to 10 :";
cin >> guess;
if(guess <= 0 || guess > 10)
cout << "Please check the number!! should be between 1 to 10\n"
<<"\nRe-enter data\n ";
}while(guess <= 0 || guess > 10);

dice = rand()%10 + 1; // Will hold the randomly generated integer between 1 and 10

if(dice == guess)
{
cout << "\n\nGood Luck!! You won Rs." << bettingAmount * 10;
amount = amount + bettingAmount * 10;
}
else
{
cout << "Bad Luck this time !! You lost $ "<< bettingAmount <<"\n";
amount = amount - bettingAmount;
}

cout << "\nThe winning number was : " << dice <<"\n";
cout << "\n"<<playerName<<", You have $ " << amount << "\n";
if(amount == 0)
{
cout << "You have no money to play ";
break;
}
cout << "\n\n-->Do you want to play again (y/n)? ";
cin >> choice;
 }while(choice =='Y'|| choice=='y');

cout << "\n\n\n";

drawLine(70,'=');
cout << "\n\nThanks for playing game. Your balance amount is $ " << amount << "\n\
n";
drawLine(70,'=');

return 0;
}

void drawLine(int n, char symbol)

{
for(int i=0; i<n; i++)
cout << symbol;
cout << "\n" ;
}

void rules()
{
system("cls");
cout << "\n\n";
drawLine(80,'-');
cout << "\t\tRULES OF THE GAME\n";
drawLine(80,'-');
cout << "\t1. Choose any number between 1 to 10\n";
cout << "\t2. If you win you will get 10 times of money you bet\n";
cout << "\t3. If you bet on wrong number you will lose your betting amount\n\n";
drawLine(80,'-');
}

// END OF PROGRAM

OUT PUT
HARDWARE REQUIREMENTS
 PROCESSOR : Intel Pentium 4 or more
RAM : 1 GB or more
MONITOR : 15” COLOR
HARD DISK : 40 GB hard disk recommended
KEYBOARD : STANDARD 102 KEYS

SOFTWARE REQUIREMENTS

OPERATING SYSTEM : Windows 7 Ultimate

FRONT-END : C++
LANGUAGE : C++
BACKEND : SQL Server 2008
 CONCLUSIONS

When the community is the resource holder (as in the gambling game)
local governments should extract the ultimate in the bargaining process.
The empirical evidence presented has shown this not to be the case. As
the resource holder, the community is able to extract giveaways, lump
payments, corporate give-aways, and one-time contributions that it
would not receive as a player in the tradi- tional economic game.
However, in spite of the change in its position, one constant remains: a
series of factors and events conspire to assure that the community is
unable to fully capitalize on its role as a resource holder. Although the
community is likely to get a good deal, it is less likely to get the best
deal.
While the community generally may not experience the winner’s
curse, a number of factors com- bine to limit the public resource
holders’ ability to extract maximum concessions from the private
players. Legal constraints dictate that the community as resource holder
conduct an open and trans- parent game. Community resource holders
are more likely to provide a clear implication of the ground rules for
players, including a formal schedule, selection criteria and their relative
importance. The community resource holder also sets an open baseline
criteria for player participation and is required to share all bids with all
players rather than provide selected data to individual players.
Furthermore, the openness of the bargaining process eliminates the use
of arbitrary deadlines and postponed final decision dates that are used
effectively to drive up bids sought by private resource holders.
However, perhaps the most important feature that limits the ability of
the community as a resource holder from maximizing its gain is the lack
of a single and well-defined bottom line or desired out- come.
Community negotiators must consider the divergent needs of a wide
variety of interest groups. Inevitably, actions or outcomes that please
one group are in conflict with the needs of other interest groups. Thus,
whether the outcome of the negotiations are most efficient and equitable
depends on whom is coordinating the evaluations. For the private
resource holder, the fiscal perspective is the only bottom line. For the
public resource holder, there are many goals and bottom lines including
economic, fiscal, social, and political objectives. The need to address
multiple bottom lines inevita- bly results in a failure to maximize return
on any single objective.
In the final analysis, the legally mandated openness and politically
mandated inclusivity princi- ples, which are at the very foundation of
what is expected of government, limit the public resource holder’s
ability to maximize its negotiating advantage. Thus, the difference
between what the public resource holder might extract without
constraints and what it actually extracts defines the cost of the
expectations placed on the public sector. The social and political costs of
foregoing that openness and inclusivity far outweigh the fiscal costs
associated with the public sector’s inability to maximize its negotiating
advantages.
ACKNOWLEDGMENTS: Thanks to the anonymous referees for their
thoughtful comments and helpful sugges- tions on earlier versions of
this paper. An earlier version of this article was presented in April 1998
at the annual meeting of the Urban Affairs Association in Fort Worth,
Texas.
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