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13 Dec 09 Slot Machine Payout Percentages

slotmaschineOne of the most interesting academic discussions to have about slot machines is the discussion about payout percentages. There are two basic types of payout percentages associated with any gambling activity, the theoretical payout percentage and the actual payout percentage. The theoretical payout percentage is based on a player playing perfect strategy and represents the maximum yield based on the game underlying statistics that it could have. The actual payout percentage is compiled through empirical data by taking the amount of money the house wins and comparing it to the amount of money the house loses in order to compute a percentage of money that the house returns to the player for each particular game.

For slot machines, there are many slot machines where the theoretical and actual payout percentages are identical. These would be single pay line slot machines with a one coin maximum, otherwise known as the classic one-armed bandits. The reason that the two payout percentages are identical for this slot machine type is that there are no user choices in the actual game. You simply put your money in and spin the reels. This means that over the long run, the actual and theoretical payout percentages will converge and for practical terms will remain identical to each other.

For the next class up of slot machine, things are a little bit different. This would be the second version of the one-armed bandit where the player has a choice of betting one, two or three coins per spin. Since the best odds are always going to be present at the top coinage amounts regardless of the class of slot machine being played, players can actually end up giving themselves worse than normal odds by playing less than three coins per spin. This means that the theoretical payout percentage could be based on the three coin maximum, but if most players on the machine play less than three coins per spin the actual payout percentage could be quite a bit lower than that. For these types of slot machines, it is not uncommon to have a theoretical payout percentage in excess of 99% and an actual payout percentage in the 95% to 96% range.

The same is true for the new age video slot machines where there are dozens of different pay lines available. Payout percentages in the theoretical range could still be in the 99% plus range while people playing far less than the maximum number of pay lines (and therefore far less than the maximum number of coins) could bring the actual payout percentage down below 95%. These differences represent real money being lost and won and that is why knowing the difference between theoretical and actual payout percentages for slot machines is important.

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