Examining How Casinos Operate and Make Money: House Edge

The seasoned gambler can count on true odds to dictate the chances of winning a particular game, right? Not exactly. Casinos aren’t in the charity business – they exist to make money. And like all successful enterprises, they follow reliable business models. With their intimate understanding of probability and odds, casino owners guarantee themselves a healthy bottom line.

So you can’t beat the odds when the house arranges them in its favor, but you can understand the odds of winning inside a casino by arming yourself with information about the house edge. The house edge (sometimes known as the casino advantage or house advantage) by definition is the small percentage of all wagers that the casino expects to win. Every game has a different house edge, and even certain bets within a single game have a better house edge than other bets.

To put it a different way, casinos expect to payout slightly less money to winning bettors than they take in from losing bettors. The laws of probability tell
casinos how often certain bets win relative to how often they lose. Casinos then calculate the payout odds based on the winning probabilities, or true odds. The payouts are typically smaller than the true odds, ensuring that, with enough betting action, the casino will take in a certain amount with every dollar wagered.

The edge for many games, such as video poker or blackjack, varies depending on the particular type and version you find and on how skillfully you play.

With some games, casinos charge a fee, or commission. Baccarat is a perfect example. Ifyou bet on the banker’s hand and win, a 5 percent commission is deducted from your winning bet. This fee tilts the odds slightly in favor of the house and ensures that the casino makes a profit at this popular table game.
Another example of fees is in sports betting. The house adds what is called vigorish or vig (a commission) to every wager.