When Are State Lotteries a Good Bet?
AbstractThis paper outlines the conditions under which a state-run lottery yields an expected return greater than its costs. The analysis considers the possibility of multiple winner, the fact that lottery winnings are typically paid out over a 10 to 20 year span, the taxation of lottery winnings as income, and the government's vigorish. We also derive the conditions under which it is worthwhile to buy every possible outcome of the litter, hence guaranteeing a winning ticket. We then apply our analysis to the recent $106.5 million Florida Lottery and the $27 million Virginia Lottery in which an Australian consortium attempted to buy the pot.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 19 (1993)
Issue (Month): 2 (Spring)
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Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Borg, Mary O. & Mason, Paul M., 1988. "The Budgetary Incidence of a Lottery to Support Education," National Tax Journal, National Tax Association, vol. 41(1), pages 75-85, March Cit.
- Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: A Survey of the Literature," Working Papers 1109, College of the Holy Cross, Department of Economics.
- Kent R. Grote & Victor A. Matheson, 2006.
"In Search of a Fair Bet in the Lottery,"
Eastern Economic Journal,
Eastern Economic Association, vol. 32(4), pages 673-684, Fall.
- Victor A. Matheson & Kent R. Grote, 2003. "In Search of a Fair Bet in the Lottery," Department of Economics Working Papers 2003-16, Department of Economics, Williams College.
- Victor Matheson & Kent Grote, 2004. "In Search of a Fair Bet in the Lottery," Working Papers 0401, College of the Holy Cross, Department of Economics.
- Frank, Sascha & Rehm, Jan, 2007. "An unnoted fair bet in german state run lotteries, a short notice," MPRA Paper 5766, University Library of Munich, Germany.
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