The most sophisticated place in the world for convincing us to part with our money is Wall Street. Vegas, however, is not far behind.
Vegas has convinced us that not only is throwing away money “fun” but flying somewhere to do so makes it more fun.
Here are some of the psychological tactics that Vegas uses to make parting with our money fun.
First, our brains are bombarded with stimuli. Because there are so many games and machines, and people, there is always someone winning something. And Vegas goes to great lengths to ensure that we notice the winners.
Sirens and flashes ensure our minds pay attention whenever someone wins something. Losing, on the other hand, is a private affair. There are no room deafening sounds to the emptiness of losing. This makes winners more available in our mind and skews the odds that we too might be a winner.
Second, Vegas distorts the real odds of winning. Vegas never sleeps and they don't want you to either. They know when your brain is craving sleep you tend to be less rational. Sleep-deprived individuals tend to make choices that emphasize monetary gain. Long nights and late mornings, some booze, plus a time zone combine to color the long odds of winning. (Additionally, people tend to take on increasing risk in an attempt to win back prior losses.)
Third, the powerful effect of the near-miss. There is a reason when you pull the handle on the slot machine the response is often cherry-cherry-orange and not orange-apple-cherry. Part of the problem is that people who play games of pure chance (e.g., a slot machine or the lottery) mistakenly believe some element of skill is involved. A response that wavers from a desirable one only a little (a near miss) tells the brain that we're on the right track and we should just try a little harder.
Also, near-misses trick the brain into believing we've won when we've actually lost (from the perspective of our dopamine neurons, near misses are virtually indistinguishable from actual wins.) According to Jonah Lehrer, this feedback tickles our reward mechanism, which is why Vegas invests in games that have a lot of near misses. The illusion of control, combined with a near miss, turns the brain into mush. (And this effect is even more powerful if you`re a regular player!)
Finally, we all think we're from Lake Wobegon. We overestimate our intelligence and underestimate others. Since we intuitively feel that skill plays a role (and the near miss reinforces this), we believe we have better odds than we do.
Sources: The Near Miss Effect; Short on Sleep the Brain Favors Long Odds