The economics of Las Vegas

Casino/hotels invest resources to keep you within their space, so you will gamble on behaviorally tempting negative-sum games. This means excellent food at bargain prices, and of course disorientating space designs as well.  No one can find their way through a big casino for the first time without getting confused.

These two features — food quality and imperfect mobility — are two sides of the same coin.  You are more likely to gamble where you eat, so they win back your culinary gains on the slot machines.  If gambler mobility increases enough (e.g., Las Vegas now has a monorail), the quality of casino food will decline.  There is no point in luring in those who will not stay.

For the pure non-gambler such as myself, it is the cross-subsidies which make the city attractive.  I get the lower prices and never cough the money back up at the slot machines. 

Would more mobility across casinos make me better off?  On one hand, more mobility would mean more freedom of choice.  I would no longer be stuck in the hotel restaurant, unwilling to navigate the casinos and the deliberately unsynchronized traffic lights along the main road.  Yet the macro-state of being stuck (ex post, but not ex ante, when choosing a hotel) also delivers, in competitive equilibrium, lower prices and higher quality for the meals I want.  Do I love or hate this unusual trade-off?  Is this how life in a gilded cage would feel?

How can non-casino restaurants survive here?  They must compete against highly subsidized competition.  Yet the range and quality of non-casino places is first-rate.  Does this mean that restaurants elsewhere could be better — essentially for gratis — if only they had to try harder?  Have we found "X-Inefficiency" within the restaurant industry?

I’ve opened up the comments section.


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