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

Ryan Gallagher ()

Growth and Change, 2014, vol. 45, issue 1, 41-59

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.

Date: 2014
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