Zheng Gu

Type of Submission

Refereed Article


This study investigates economies of scale in the gaming industry. Vertical analyses of aggregate income statements were performed comparing large casinos with small casinos on the Las Vegas Strip and in Atlantic City. In addition, correlations between cost ratios and casino revenue of Atlantic City casinos were examined. The findings show that large casinos enjoy economies of scale in terms of cost of sales, payroll, and general and administrative (including marketing) expenses. The study suggests that consolidation via mergers and acquisitions to achieve economies of scale is a viable strategy for casinos to remain profitable in saturated gaming markets.