An Examination of Cannibalization Effects within the Riverboat Gaming Industry: The Case of Illinois-Area Casinos

Authors

  • Ryan M. Gallagher


  • Ryan M. Gallagher is an assistant professor at Northeastern Illinois University, Chicago, IL, USA. His e-mail address is: r-gallagher1@neiu.edu. Andy Chupick, Patrick Heath, Almira Kadic, and Luis Trani deserve special credit for collecting and organizing most of the casino-level data used for this project. I would also like to thank two anonymous referees and Mike Wenz (the Editor of this special issue) for helpful comments on earlier drafts of this paper. Financial support for this project was provided by Northeastern Illinois University's Committee for Organized Research

Abstract

As states become increasingly reliant on taxable casino revenues to augment their budgets, questions concerning optimal casino location have entered into policy dialogues across the country. Notably, policy makers have become concerned with the presence and size of so-called “cannibalization effects” within the casino industry whereby casinos operating within overlapping markets capture one another's business. However, the size, significance, and underlying mechanics of these effects have received very little attention in the academic literature. Using a unique data panel for the Illinois region that spans over a decade, this paper develops a working framework for identifying the presence of intra-industry cannibalization effects for the riverboat gaming industry. Evidence suggests cannibalization effects do indeed exist and are largely a function of new casino development, not the expansion of pre-existing casinos. These effects also attenuate rather quickly with distance.

Ancillary