This paper utilizes data on Missouri’s casino industry to examine how clustered casinos, such as those in Kansas City and St. Louis, perform compared to dispersed or isolated casinos, such as those in Boonville, Caruthersville, La Grange, and St. Joseph. Missouri limits the number of casino licenses allowed; however, it does not explicitly mandate casino locations. Missouri provides a unique natural experiment for comparing location model performance. Although there is no published research on which type of casino location model is more effective for generating industry revenues and associated taxes, state legislatures have nevertheless been following an isolated casino location model. But it is not at all obvious that this strategy leads to higher aggregate revenues. Using 2011 data on Missouri’s casino industry, we find that casino performance may not depend on whether it is isolated or in a cluster. This result suggests that the casino market is relatively efficient, given the regulations it faces. However, there may still be significant costs from restricting casino locations. We speculate that politicians are likely to use the isolated model as a mechanism to maximize voter support for casino legalization
