Deregulation and Cross-Border Substitution in Iowa's Riverboat Gambling Industry

When riverboat casinos began operating in Iowa in April 1991 a strict regulatory structure, consisting of mandated sailing, wagering and loss limits, and casino space restrictions, was imposed. The restrictions were removed in May 1994 after Illinois introduced riverboat gambling without space, betting, or loss limits. Using data on casino win and admissions in Iowa and Illinois, this study analyzes the impact that deregulation had on casino win, win per admission, and total admissions. The findings reveal that deregulation significantly increased casino win, win per admission, and total admissions in Iowa. Moreover, when focusing on the "Quad Cities" market, which encompasses both Iowa and Illinois casinos, deregulation is found to result in significant cross-border substitution. In addition, there is evidence that deregulation has partly resulted in existing gamblers losing more money as opposed to increasing the number of gamblers.