Calculating Casinos Edge in Different Casino Games
The house edge is defined as the ratio of the average loss to the initial bet. The house edge is NOT the ration of money lost to total money wagered.
For some games, the starting bet is not always the ending bet. As an example in Blackjack, Let it Ride and Caribbean stud poker the player is allowed to increase their bet when the odds favor doing so. In these cases any extra money that is placed in not included in the denominator thereby increasing the measure of risk.
The reason for the house edge being related to the first bet and not the average bet is that is assists the player in working out how much he or she may lose. If we take the following example that the house edge in blackjack is 0.8%, the player can assume that for every 10 credits he or she bets, they will lose 0.8 of a credit as an average. Most players will not know how much their average bet will be in games like blackjack related to the original bet. So, any statistic based on the average bet would be almost impossible to apply.
The statistics can be very biased as a measure of risk. In Caribbean stud poker, the house edge is 5.22%. In roulette, the house edge is 5.26%. The difference between average money lost against average money wagered in Caribbean stud poker is only 2.56%. Anyone looking at the house edge of both games will see a very small, 0.04% difference. To the uninformed person, this may well read that the odds are almost the same on both games. This is untrue if you calculate the average, as above in Caribbean stud poker it works out at 2.56%. This means that the actual difference is 2.70% so a player playing Caribbean stud poker is likely to lose less than if they were playing roulette. Therefore, it is better for a player to play Caribbean stud poker than roulette.
Many other statistical sources do not enter into the equation of house edge calculations. “Ties” do not enter, “don’t pass” (rollover) do not enter either and nor do the “banker and player” bets in baccarat. The rationale is that if a bet is not resolved then it should be ignored and not included in any calculations relating to house edge at all.
A card player should learn that once the money is in the pot, it isn't his any longer.
Herbert Yardley (1957)