Playing by the rules: Government regulation and consumer trust in the online poker industry

Abstract

This study examines how government regulation can affect consumer trust and the perceived value of digital services. Data from interviews, a focus group, and a discrete choice experiment conducted by online poker players find that regulation significantly increases the amount players are willing to pay to play online poker and that the size of this regulatory premium differs according to player attitudes. Players are willing to pay an extra $1.83 per hour to play on government-regulated sites and players who view these sites as more secure are willing to pay even more. However, the size of the regulatory premium falls and, in some cases, becomes negative when players believe that government regulation increases the likelihood that their winnings will be taxed. The study also finds lingering effects of the Unlawful Internet Gambling Enforcement Act, which made it difficult for players to manage funds on unregulated sites. Players who think regulation eases these transactions are willing to pay more. Interestingly, government regulation seems to offer an assurance against future government disruptions in the market. Our findings contribute to the understanding of trust-building mechanisms in online services, highlighting the complex effects of government regulation in complementing private measures.