Online poker in North America: Empirical evidence on its complementary effect on the offline gambling market

Abstract

The relationship between online gambling and offline gambling is still an unsettled question: Is online poker mainly a new way of distribution, substituting the offline gambling products? Or does it add to the portfolio of gambling products as a complement, increasing not only the total volume of revenues but also the revenues of each product? This paper is first to shed light on this issue, using a cross-section of online poker revenue and offline gambling revenue in all U.S. states and Canadian provinces. The main finding is that online poker and offline gambling are complementary goods, which suggests that the presence of online poker may increase demand of offline gambling overall. These findings suggest that the offline gambling industry should not generally be adverse to the expansion of Internet poker. This study also reveals the most accurate estimates to date of the online poker market size in 2010 in U.S. states and Canadian provinces/territories.