What is House Advantage and How it is Achieved?

House Edge
What is House Advantage and How it is Achieved?

The term “house advantage” refers to the mathematical edge maintained by casino operators that ensures the house will always end up making money. The house advantage in games, usually given as a percentage, can range from less than 1% for blackjack players using basic strategy to quite large as 25% for some blackjack side bets.

These numbers represent the average amount of all their wagers that players will lose over the long term. Remember, in gambling almost anything can happen in the short term. Concepts like house advantage and Return to Player are always calculated over the long term. Most players realize that the house has an advantage on all games it offers, but how the house achieves that advantage is often not well understood by players.

Ways how the house achieves its advantage

Ways how the house achieves its advantage
Ways how the house achieves its advantage

The house achieves its advantage in a few different ways like the rules of the game or game odds.

1. Rules of the Game

When speaking of rules of the game; every form of gambling has rules that define everything about that game, including how the game is played; what equipment is used and when betting occurs. In effect, the rules are the game. The rules can also help create a house edge; like there is a rule in blackjack stating that; if both the player; and the dealer “bust,” the player still loses.

2. Odds of the Game

Also, it is often achieved by setting payoff odds lower than the true odds of winning. Like in the game of Roulette where the wheels have 37 numbers (1 to 36 and 0); so the true odds of picking the correct number with a single bet are 36 to 1 where 36 loses for every one win. However, the payoff odds for picking the correct number are 35 to 1, just slightly less than the true odds. This difference between the true odds; and the payoff odds results in a house advantage of 2.7% – over time; players will lose an average of 2.7% of all the money they wager.

Other common games in which the payoff odds are set lower than the true odds include mini-baccarat, blackjack, Pai Gow poker, let it ride, three card poker and Caribbean poker.

It is the total amount wagered that is exposed to the house edge, not just the amount of money brought to the gambling game initially. Many punters continually re-wager winnings, chips or credits, thereby increasing their total amount wagered and increasing the amount of money exposed to the house advantage.

House advantage in pokies and what does this mean to a punter

House advantage in pokies and what does this mean to a punter
House advantage in pokies and what does this mean to a punter

The most played games at casinos are pokies. Pokies and video lottery terms are another form of gambling where the overall payoff odds are set lower than the true odds. The term casino operators often use when referring to house advantage on pokies and lotteries is a theoretical hold.

The reason they hold is called “theoretical” is that it’s based on long term statistical probabilities. The results of every play are random and independent of any other play; however, over the long term, the overall results will drift toward the expected or theoretical hold.

Anyone who bets and gamble can expect to experience some wins that will occur unpredictably and at random. Of course, in between those wins are losses. Your net results will fluctuate up and down but the overall trend is likely to be downward.

Gambling is Random

Gambling is Random
Gambling is Random

The idea that most forms of gambling are random, but still have a house advantage resulting in predictable player losses over time, may seem confusing. Here is an example to understand Player A and Player B each have $100 and they decide to play a simple coin flipping game. If the coin flips head player A takes a dollar from player B but if it flips tails player B takes a dollar from player A. It’s fairly clear what will happen over time in this game. Each coin flip is random – heads and tails both have a 50/50 chance of occurring. No one has an advantage, so the amount of money each player has will probably remain relatively even.

In another example each player still starts with $100 dollars, but now the payoffs will be slightly different. If the coin flips heads, player A still takes a dollar from player B; but if it flips tails, player B takes only 90 cents from player A.

Here as house advantage is introduced player A and B will still win about equally as often, but due to the new payoff structure, player B money will slowly drain to zero because its payoff odds are now lower than the true odds. Notice that the coin flip is still completely random and fair, but the payoff structure now gives player A a house advantage.

Randomness and house edge can coexist

Randomness and house edge can coexist
Randomness and house edge can coexist

All casino games work in this same way, although the complexity of the games can make it harder to see. Randomness and house advantage can exist quite easily together. The effect in casino games is that the results are unpredictable that is random, but the games are still profitable for the operator which is house advantage.

The result of randomness and house advantage on a player’s money is similar to the effect of a funnel. The punter starts out with a lot of money, but slowly and surely it is smaller down through the move until nothing remains.

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