Australia's Gambling Industries - Productivity Commission

• the triangular area ’g’ which can be seen as representing consumption in excess
of a satiation point (box C.3) has not been included in the calculations.
Figure C.7
Areas included in the calculation of the benefit for problem
gamblers
Price
p 0 p
p1 0 p
p(1+t)p
p p
a
cb
cd d
e
D1 0 p
g
f
D 0 p
q1 0 p
g
Quantity
q 0 p
This figure has, for simplicity, been drawn using only the income adjusted demand schedules.
Note that the tax revenue for recreational gamblers is a net benefit to society as the
consumer receives benefits in the form of satisfaction to cover the cost including the
tax paid. As the tax paid is in excess of the cost of producing the product, it
represents a net benefit to those in receipt of the tax revenue but not a loss to those
paying the tax. For problem gamblers, the tax on gambling in excess of the ’normal’
level of consumption represents a gain to others, but it is a cost to the problem
gambler because it is not matched by ’normal’ satisfaction from consumption. Thus,
the tax collected from this group is not an unambiguous gain for society.
The adjusted surplus on the ’normal’ level of gambling for problem gamblers (S1 0 p)
is estimated using equations (1) and (2) as it is for recreational gamblers, together
with information on the assumed level of ’normal’ consumption. The ’normal’ level
of gambling is presumed to be twice the per capital level of recreational gamblers
multiplied by the estimated number of problem gamblers.
The adjusted 'normal' level of expenditure ‘E’ is estimated as:
E = p(1+t) p *q1 0 p
C.22 GAMBLING