ABSTRACT
Introduction A rapid global expansion in gambling turnover has heightened interest in identifying the ‘optimal’ level of regulation in the gambling industry. Key policy objectives in this regard includedetermining the ideal structure of gambling taxes, maximising the net social benefit of gambling and devising optimal responses to environmental changes, such as the growth of Internet gambling. Successful formulation of policy in these areas depends on the availability of good empirical evidence on demand characteristics and substitution patterns for various types of gambling activity. Policymakers in many countries are especially interested in assessing substitution effects for national and state lotteries, since they have become increasingly dependent on this source of revenue. They are also interested in determining how regulatory changes affect the demand for alcohol, tobacco, entertainment services and other consumer products that generate substantial tax revenue. The question of whether these products are substitutes or complements for gambling has important revenue implications when gambling regulations are modified.
