How Does a Casino Calculate House Edge and Variance?
For a casino to make money, it must know its house edge and variance. The house edge determines how much a casino will profit from a given game, while variance relates to how much it will lose. In order to calculate these figures, the casino employs the services of computer programmers and mathematicians. Because the work is complex and time-consuming, casinos do not employ their own experts and outsource this function to outside consultants.
A casino has no employees other than dealers and pit bosses who will watch you while you play the games. As such, the staff is highly trained and has access to the databases of the casino’s patrons. However, a first-time visitor may get confused in the casino. The layout is generally a large open room, and the people seem to know what they’re doing. Many casinos monitor visitors with cameras and dealers, but there are no posted rules.
While casinos are very profitable businesses, they don’t lose money every day. Many studies have been conducted over the years, and the Wall Street Journal gained access to a private gambling database. It found that only 13.5% of people gamble at a casino, which explains why the casino’s profits are so high. Moreover, the casino has a high rate of return on investment, which means it can pay off the debts of its patrons.