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Abstract
In Macao, the VIP gaming revenue accounts for over two thirds of the total gaming revenue. Since the VIP gaming market is highly competitive, several incentives such as rebates are used to attract the VIP players. There are two commonly used rebate systems in the VIP gaming market: rebate on buy-in and rebate on actual loss. The analysis of rebate on buy-in is relatively easy. However, the analysis of rebate on actual loss is more complicated, which involves the Unit Normal Linear Loss Integral. Using empirical data, MacDonald derived a simple approximation formula for computing the rebate rate on actual loss. In this paper, we use mathematical analysis to derive more accurate approximation formulas for computing the rebate rate on actual loss. Some practical examples are given to compare the accuracies of these formulas. We also discuss how these two rebate systems affect the fluctuations of the results.
Acknowledgements
We wish to thank the anonymous referees for their helpful suggestions which improve the presentation of the paper. We also acknowledge the support from the Institute for the Study of Commercial Gaming of University of Macau.