The Peculiar Scale Economies of Lotto
AbstractThe best-selling lottery game in the United States is lotto, a parimutuel game of long odds and large jackpots. Unlike in the other popular lottery games (numbers and instant). there is a strong tendency for per-capita lotto sales to increase with the size of the population base. The fact that the jackpot also tends to increase with population size is not a complete explanation, since the probability of winning tends to be inversely proportional to state population. our explanation for why the games are more successful in large states is that players tend to judge the likelihood of winning based on the frequency with which someone wins; then a larger state can offer a game at longer odds but the same perceived probability of winning as a smaller state.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3766.
Date of creation: Jul 1991
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Publication status: published as American Economic Review, June 1993
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Other versions of this item:
- Cook, Philip J & Clotfelter, Charles T, 1993. "The Peculiar Scale Economies of Lotto," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 634-43, June.
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- Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 56, pages 279.
- Charles T. Clotfelter & Philip J. Cook, 1987. "Implicit Taxation in Lottery Finance," NBER Working Papers 2246, National Bureau of Economic Research, Inc.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, American Economic Association, vol. 75(3), pages 424-40, June.
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