Autore
Simon, Jonathan

Titolo
The expected value of lotto when not all numbers are equal
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1997 - Fascicolo: 1 - Pagina iniziale: 1 - Pagina finale: 18

The expected value of a lotto ticket depends on the particular numbers selected on the payslip. This is because (in most lotto games around the world) the individual prizes are not fixed in advance; instead, a prize pool is divided between all the players with winning tickets. This means that if you choose a popular set of numbers, your share of the prize will be low, should you win. The expected value of every ticket would be the same if all players were to choose their numbers randomly and independently. However, previous studies show that the actual distribution of the numbers chosen by players is far from uniform. Many players select numbers which are lucky, or which have personal significance. In this paper, I posit a group of "rational" players, who choose their numbers randomly, but specifically avoid the superstitious numbers. For these players, the expected value of a lotto ticket is higher, the greater the number of superstitious people, and the smaller the set of combinations that they play. Despite the low prize payout rates in most lotto games, I show that the expected value may even exceed the ticket price, in which case the purchase of lotto tickets by the rational players may be consistent with standard Expected Utility theory, even if they are risk averse.



Testo completo: http://hdl.handle.net/1814/610

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