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The Heart and Soul of keno

Jun 8, 2004 2:44 AM

You’ve marked an 8 spot ticket, you’re watching the game being called. They’ve called 19 numbers, and you already have a seven out of 8, with one ball to go. You already have won $1,480, and if you hit the last number, you’ll win $25,000. The keno manager, sweating profusely, stops the caller momentarily and rushes over to you, offering to buy back your ticket. If you were willing to sell your ticket, what would be a fair price? You have one chance in 61 of collecting $25,000, and 60 chances in 61 of collecting $1,480.00. Therefore, your expected return on the ticket is:

1/61 X $25,000 + 60/61 X $1,480 = $1,865.57

which is a fair price for the ticket. In other words, the keno manager should not pay you any more than this for the ticket, and you should not accept any less.

I am devoting the whole column this week to this topic, because my friends, this is the HEART AND SOUL of keno! keno, which is after all just a form of lottery, involves the attempt to win a large sum of money with a relatively small wager. In the example above, the keno manager is willing to pay you an additional $385.57 above the $1,480 which you are guaranteed to get if you will surrender your ticket. Even though this IS a fair price, and the keno manager would be foolish to offer you more, I can almost guarantee that 99 out of a hundred keno players would refuse to surrender this ticket for $1,865.57! Why not? Because they have a CHANCE to win $25,000! In essence, they are willing to bet a sure $385 against the chance of an additional $23,500 or so. The irony here is that I am also quite sure that most keno players would not play a $385 ticket for a chance to win $23,500 straight up!

This concept is called UTILITY, and is a concept which is addressed in several books on the theory of games. Briefly stated, the theory of utility states that the CHANCE to win $50,000 has more value to the gambler than the RISK of losing $1, even if the chance of winning the $50,000 is somewhat less than 50,000 to one. Why? Because one can do so much more with $50,000 than with $1!

This is the HEART and SOUL of keno, the attempt to WIN BIG. If you are totally concerned with house percentages, keno is not your game. Go play a video poker machine, where the absolute top pay off odds are something like 1,000-1, or maybe play some roulette, where you can win 35-1.

Please consider these three $1.00 8 spot tickets, with their house percentages:

8 SPOT TICKET

8 SPOT TICKET

8 SPOT TICKET

PRICE= 1.00

PRICE= 1.00

PRICE= 1.00

0/8 0.00

0/8 0.00

0/8 0.00

1/8 0.00

1/8 0.00

1/8 0.00

2/8 0.00

2/8 0.00

2/8 0.00

3/8 2.50

3/8 0.00

3/8 0.00

4/8 2.50

4/8 0.00

4/8 0.00

5/8 2.50

5/8 9.00

5/8 0.00

6/8 2.50

6/8 90.00

6/8 0.00

7/8 2.50

7/8 1,650.00

7/8 0.00

8/8 2.50

8/8 18,000.00

8/8 100,000.00

HOUSE PC= 20.71%

HOUSE PC= 27.92%

HOUSE PC= 56.54%

The first 8 spot, though it’s house percentage is a relatively low 20.71%, would, I’m afraid, find very few players. It is, to say the least, a little humdrum! Why? Because most Keno players would find precious little more utility in $2.50 than they do in $1.00, and therefore the risk of $1.00 to win $2.50 would not be worthwhile. The second ticket is very similar to eight spots found at most Keno games, both in payouts and in house percentage, and is one of the most popular tickets played. The third ticket, though it’s house percentage is DOUBLE that of the traditional eight spot, never the less will find some players, because $100,000.00 undeniably has more utility to most gamblers than the risk of losing $1.00! This ticket also has more attraction on the top end than the traditional eight spot. The house percentage means virtually nothing on a ticket like this; 230,000 players or so will win nothing, while one player will go home rich. That’s life, and that’s the HEART and SOUL of KENO!

That’s it for this week! Good luck! Meet me in the lounge!