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Could a Pigouvian Subsidy Mitigate Poker Machine Externalities, in Australia?
Author(s) -
Rowell David,
GyrdHansen Dorte
Publication year - 2014
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12090
Subject(s) - externality , subsidy , revenue , microeconomics , network effect , economics , function (biology) , principal (computer security) , business , computer science , computer security , market economy , evolutionary biology , biology , accounting
Abstract Habitual gambling with electronic gaming machines can generate negative externalities. However, it is not the gambling process (wagers placed) but the outcome (revenue lost), which is a principal cause of these externalities. The specification of a quadratic externality function implies the existence of a corner solution, whereby actuarially fair electronic gaming machines that offer wagers at zero prices, could affect a reduction in the gambling externalities produced. In this paper we explore under what conditions might the introduction of actuarially fair electronic gaming machines reduce externalities associated with electronic gaming machines gambling.