Consumer preferences for network liquidity and opponent quality in online poker

ABSTRACT

Several online gambling platforms use marketplace business models where the operator facilitates wagers between players instead of directly banking games. There is a large theoretical literature on marketplace business models, but there is little empirical evidence that suggests how it may apply to gambler preferences or behavior. This study contributes to the understanding of consumers in gambling markets by testing multi-sided market theory in online poker. Using data collected from a diverse sample of online poker players (n = 719), this study empirically demonstrates how players value game availability and product quality. Our results show evidence of diminishing marginal returns to scale and benefits from product differentiation across a range of conditions found in the market. Consumers prefer that operators grow their networks when size is sufficiently small but would prefer more focus on the types of players added to games as the network grows. From a policy perspective, these findings provide support for using multi-sided market theory as a framework for taxation and licensure in gambling products.

KEYWORDS:

• Network effects
• online poker
• externality
• multi-sided markets
• discrete choice experiment

Acknowledgements

The authors thank Scott Savage for his comments, Melissa Redona for help with data collection, A. K. Singh for help with survey design, and Peter Counts, Darren Heyman, Brent Todd, and Dan Stewart for their input on the survey. The authors also thank volunteer participants in the focus-group and survey.

Disclosure statement

Since 2016, KP has received research funds from the Washington State Gaming Commission, Manitoba Gambling Research Program, UNLV International Centre for Gaming Regulation, U.S.-Japan Business Council, Board of Regents of the Nevada System of Higher Education. He has received consulting payments from British Columbia Lottery Corporation, Responsible Gambling Council of Canada, Intralot, the Commonwealth of The Bahamas, West Virginia Lottery, Indiana Gaming Commission, and iDevelopment and Economic Association. He has received reimbursement for travel from the National Conference of State Legislators, National Council for Problem Gambling, International Association of Gaming Advisors, National Centre for Responsible Gambling, Responsible Gambling Council of Canada, North American State and Provincial Lottery Association, Evergreen Council on Problem Gambling, Global Gaming Expo Asia, and Alberta Gambling Research Institute. He is a member of the National Council for Problem Gambling, and formerly was the Director of Social Responsibility at the British Columbia Lottery Corporation.

Data availability statement

Due to the nature of this research, participants of this study did not agree for their data to be shared publicly, so supporting data is not available. The authors will collaborate with external researchers to replicate the findings.

Additional information

Funding

No funding was received for this study.

Notes on contributors

Bradley S. Wimmer

Bradley S. Wimmer is Professor of Economics at the University of Nevada, Las Vegas (UNLV). His research issues include the associated effects regulation and deregulation have on the market for telecommunications. Wimmer also researches the effects of asymmetric information, certification worker incentives, franchising and the minimum wage.

Kahlil S. Philander

Kahlil Philander is an Assistant Professor in the School of Hospitality Business Management. He also holds an appointment as an Honorary Lecturer in the School of Psychology at the University of Sydney. His research interests are in gambling economics.