Tuesday, January 26, 2016
High Stakes - Lottery
The great Powerball, having a winning value that does not fill the size of billboards was split amongst three people in California, Tennessee and Florida. Draw sales went upto an alarming $787,000 a minute during the last hours. To people it seems that playing a lottery might be fun but you have a 1 in a 292m chance of winning, which makes it financially foolish to do so.This year, the lottery companies increased the size of the geographic pool, thus the potential pool of participants. The lottery this year was available to residents of 44 of America’s 50 states.
If the chances of winning become so slim that no one guesses the right combination of numbers, the prize rolls over, growing to a vast sum. Both Powerball and the British national lottery changed their rules to this effect in October, by increasing the number of balls in the draw. In Britain the change slashed the chance of a winning guess from 1 in 14m to 1 in 45m. In America it fell from 1 in 175m to 1 in 292m. But there always remains a chance to win a small prize. So even as lottery designers have been lowering the chances of winning the jackpot, they have been boosting the chances of winning lesser prizes, notes David Spiegelhalter of the University of Cambridge.
http://www.economist.com/news/21688208-lotteries-pull-punters-making-it-harder-win-americans-have-1-292m
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This is an interesting article because while the chances of winning the actual lottery are pretty low that might sway consumer interest away from buying tickets and participating in the lottery all together. Adding lesser prizes is great because people are more likely to participate and whether they win or not is irrelevant because at least the lottery had added something to make it more worth participating and therefore the lottery attracts more consumers.
ReplyDeleteI had no idea that the odds were that slim. Although it may be financially foolish to play, it's kind of hard not to when there is over $1 billion at stake. One positive aspect of the massive participation in the Powerball is the return in lottery revenue to schools and other public organizations. I read an article the other day that claimed 30% of the lottery revenue actually goes to schools. With such high demand this year, I would expect that 30% to be a huge number, which could make a difference for many struggling districts.
ReplyDeleteAs you stated "it may be financially foolish to play the lottery as the chances are 1 in 292 million". But it is interesting to see that the lottery companies have increased the number of participating states in the lottery. Probability wise this action lessens the chances of winning of an individual going from 1 in 175 million to 1 in 292 million. But as a response we saw more people play the Powerball to test their luck. This shows that a simple cost benefit analysis by the players made it more attractive for them to play the Powerball. Opp cost of loosing is 5 dollars to the benefit which is potentially a billion dollars.
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