The True Cost of an Arcade Prize

I know some people who save tickets from an arcade over the course of several years in order to buy a really expensive prize like a TV even though, cost-wise, one might be better off buying that TV from a store.

Arcades make you buy prizes with “tickets” rather than with actual currency for a good reason: The true value of items is hidden. In this article, we will be using math to ascertain the true cost of these prizes.

One machine that serves up these prize tickets at an arcade I visited recently serves as a fine example of how this process works to the advantage of the arcade owner. That’s because if a person wanted to generate as many tickets as possible to make a purchase, this machine would be the one.

The Math

Machines like this one, which seeks to reward a user with tickets rather than just plain fun, probably have an internal algorithm that chooses a number of tickets it awards ahead of time. I don’t have access to this algorithm, but we can use a math concept to get a good sense of how many tickets we would get on average. It’s called “expected value” (EV).

The expected value is the average value we would get from playing the machine in each time. If we were to use this machine many times, that algorithm might award us 10 tickets, 25 tickets, 50 tickets, and so on. Eventually, after a given number of plays, we would be able to calculate an average for the number the tickets we would get on each try.

Some reward options, like the one that awards 1,000 tickets, are likely limited to 1 in 10,000 plays, while the the10-ticket option likely occurs in 1 in 3 plays. Since I don’t know how likely each ticket choice is weighted in the machine, I will be weighing them equally.

According to my calculations, the EV for each play on the machine is 22 tickets. However, if I were to factor in the 1,000-ticket option, the EV would be 44 tickets on average. Factoring in the 1,000-ticket option, however, is unnecessary because it is very clearly not equally as likely to occur as the other options. If we were to weigh it equally, we surely would skew the average.

Let's call the EV with 22 tickets EV1 and the EV of 44 tickets—which is likely a very conservative estimate—EV2.

Each play costs $1 on the machine. Hence, you could say that for EV1, you get 22 tickets for every dollar paid, or for EV2, 44 tickets for every dollar.

Bottom Line

One prize I saw there—a beginner type of guitar suited for a small kid—went for about 25,000 tickets. A similar one available online goes for about $50. Using the math above, a conservative estimate for the cost of the guitar at the arcade is $568.18—and a more realistic cost for the arcade guitar is $1,136.36.

How about cheaper reward items? A single piece of a national chocolate candy brand awarded at the arcade costs 5 tickets. While the retail cost of that item is about four cents per piece, it costs 11 cents at the arcade, conservatively, or 23 cents per piece using a more realistic estimate. That means the item was marked up two to four times its actual retail value.

A two-pack of another common candy costs 50 tickets at the arcade. At a store, the item goes for about 42 cents. At the arcade, the item has a conservative cost of $1.14 and a more realistic cost of $2.27. The markup on other items is similarly inflated.

Overall, the arcade markup for products increases as the actual value of the product increases While the markup for the chocolate candy in the first example ranged from two times to four times the retail cost, the markup for the toy-like guitar ranged from 11 to 22 times the cost at a retail establishment. While there is some variation to that markup, the trend is clear.

So—if you want to get more bang for your buck, buy directly from the source—a retail outlet. But if you insist on playing at an arcade (as I do), use your tickets to buy the less inexpensive items because there is simply less markup.

Another thing to note: The less expensive items tend to be candy. And who doesn’t love candy?

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