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Business Profitability and Social Profitability: Evaluating Industries with Externalities, The Case Casinos


  • Earl L. Grinols

    (University of Illinois)

  • David B. Mustard

    (University of Georgia)


Casino gambling is a social issue, because in addition to the direct benefits to those who own and use casinos, positive and negative externalities are reaped and borne by those who do not gamble. To correctly assess the total economic impact of casinos, one must distinguish between business profitability and social profitability. This paper provides the most comprehensive framework for addressing the theoretical cost–benefit issues of casinos by grounding cost–benefit analysis on household utility. It also discusses the current state of knowledge about the estimates of both the positive and negative externalities generated by casinos. Lastly, it corrects many prevalent errors in the debate over the economics of casino gambling.

Suggested Citation

  • Earl L. Grinols & David B. Mustard, 2005. "Business Profitability and Social Profitability: Evaluating Industries with Externalities, The Case Casinos," Law and Economics 0509001, EconWPA.
  • Handle: RePEc:wpa:wuwple:0509001
    Note: Type of Document - pdf; pages: 20. Managerial and Decision Economics, 2001, vol. 22: 143-162.

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    References listed on IDEAS

    1. William R. Eadington, 1999. "The Economics of Casino Gambling," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 173-192, Summer.
    2. Blair, Benjamin, F. & Schwer, R. Keith & Waddoups, C. Jeffrey, 1998. "Gambling as an Economic Development Strategy: The Neglected Issue of Job Satisfaction and Nonpecuniary Income," The Review of Regional Studies, Southern Regional Science Association, vol. 28(1), pages 47-62, Summer.
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    Cited by:

    1. Jonathan A. Schwabish, 2005. "Regulating Underground Industry: An Economic Analysis of Sports Betting," New York Economic Review, New York State Economics Association (NYSEA), pages 65-77.

    More about this item


    casino; crime; gambling; social costs; externality;

    JEL classification:

    • K - Law and Economics

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