(FORTUNE Magazine) – We keep looking for something to happen in the great American casino industry, and it never happens, even though economic theory tells us it must happen. Baffling, eh? And definitely requiring an end-of-summer trip to Atlantic City, would you -- you there in the FORTUNE business department -- not agree? As is well known, Babylon by the Sea has been sickish lately. It looks green around the gills even if you ignore the mountain of junk bond debt on which several of the casinos now stand and focus only on operating results. In the first quarter of 1990, gaming revenues for the then-existing 11 casinos were down, i.e., in relation to the comparable 1989 period. The year-to-year comparisons turned positive after Donald Trump opened the Taj Mahal in April. But operating profits in Atlantic City were plainly under more pressure than ever, since the industry's post-Taj revenue gains worked out to only 7% or so while the supercolossal newcomer was instantly adding 18% to local gambling capacity. By midsummer, every local casino except the Claridge and the Sands was reporting revenues significantly behind the year-ago figures. Among the heavy losers from the arrival of the Taj were Donald's two other casinos. The Trump Castle, where your servant spent two nights, showed August revenues down by $16 million, or 8%. Revenues at the Trump Plaza were off by $15 million, or 7%. In competitive markets, excess capacity is supposed to translate into price cuts. In Atlantic City in 1990, it has translated mainly into a lunatic promotional binge. Working via direct-mail offers and coupons in the newspapers, the casinos have given away millions of cards entitling visitors to free garage space, discounts on rooms and meals, and other goodies. One predictable consequence has been that incoming gamblers, who used to stay in one garage and bet mainly at the associated casino, now carry coupons from one garage and casino to another. ''The parking garages they spent fortunes on no longer give them any captivity,'' says Al Glasgow, publisher of Atlantic City Action. The promotional cards can also be used to win prizes based on time and money spent gambling. You can insert the cards directly into many slot machines, which enables management to electronically track the amount of money you also ) insert. (About 40% of Atlantic City slot play is done with the cards.) When you belly-up to the craps, blackjack, or roulette table, you can produce the card and ask to have your play monitored by a character in the pit. The more you play, the more bonus points you get and the more ''complimentary gifts'' you are entitled to. It's green stamps all over again. Why not skip all this foolishness and just cut prices? In the casino industry, the logical equivalent of a price cut would be a reduction in the house ''edge'' at different games. There are no serious signs of any such reduction. A few casinos have roulette wheels without the usual double zero (which means that bettors on average lose only 2.6% of their wagers instead of 5.2%), but offer this game only to high rollers -- not many of whom are interested in roulette. The Claridge offers a ''late surrender'' option in blackjack, which allows players to cut their losses in certain situations, and possibly trims the house advantage by 0.08%. No big deal. The obvious place to cut prices would be in the slot machines. Slot action is now king of the casino games. In Atlantic City, its share of the casino win has risen every year since 1980, and Al Glasgow expects it to hit 58% this year. At every casino in town, the house edge in the slots runs consistently around 11% (i.e., the machines on average pay out 89% of what the players put in), far above the edge in any table game. The reason for this cartel-like pricing is no real secret: The New Jersey Casino Control Commission forbids advertising that includes assertions about the odds of winning -- which means that a casino whose slots pay out more than 89% would not be allowed to tell customers about it. The commission justifies its rule by cloudily reasoning that slot advertising (or any advertising about odds) could gull innocent folks into thinking gambling was a bargain. Or something like that. But we have to assume that the industry itself likes the rule, precisely because it works to prevent price competition. Like quite a lot of other regulation.