IDEAS home Printed from https://ideas.repec.org/a/eej/eeconj/v19y1993i2p157-164.html
   My bibliography  Save this article

When Are State Lotteries a Good Bet?

Author

Listed:
  • Anthony C. Krautmann

    (De Paul University)

  • James E. Ciecka

    (De Paul University)

Abstract

This 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.

Suggested Citation

  • Anthony C. Krautmann & James E. Ciecka, 1993. "When Are State Lotteries a Good Bet?," Eastern Economic Journal, Eastern Economic Association, vol. 19(2), pages 157-164, Spring.
    • Handle: RePEc:eej:eeconj:v:19:y:1993:i:2:p:157-164
    as

    Download full text from publisher

    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume19/V19N2P157_164.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Borg, Mary O. & Mason, Paul M., 1988. "The Budgetary Incidence of a Lottery to Support Education," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(1), pages 75-85, March.
    2. Charles T. Clotfelter & Philip J. Cook, 1989. "Selling Hope: State Lotteries in America," NBER Books, National Bureau of Economic Research, Inc, number clot89-1, March.
    3. 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.
    4. Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-174, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    5. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rubenstein, Ross & Scafidi, Benjamin, 2002. "Who Pays and Who Benefits? Examining the Distributional Consequences of the Georgia Lottery for Education," National Tax Journal, National Tax Association, vol. 55(N. 2), pages 223-238, June.
    2. Harriet A. Stranahan & Mary O. Borg, 2004. "Some Futures are Brighter than Others: the Net Benefits Received by Florida Bright Futures Scholarship Recipients," Public Finance Review, , vol. 32(1), pages 105-126, January.
    3. Ghent, Linda S. & Grant, Alan P., 2010. "The Demand for Lottery Products and Their Distributional Consequences," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(2), pages 253-268, June.
    4. Humphreys, Brad & Perez, Levi, 2011. "Lottery Participants and Revenues: An International Survey of Economic Research on Lotteries," Working Papers 2011-17, University of Alberta, Department of Economics.
    5. Rubenstein, Ross & Scafidi, Benjamin, 2002. "Who Pays and Who Benefits? Examining the Distributional Consequences of the Georgia Lottery for Education," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(2), pages 223-238, June.
    6. Antonio Cabrales & Haydée Lugo, 2011. "An impure public good model with lotteries in large grou," Documentos de Trabajo del ICAE 2011-05, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    7. David Giacopassi & Mark W. Nichols & B. Grant Stitt, 2006. "Voting for a Lottery," Public Finance Review, , vol. 34(1), pages 80-100, January.
    8. Whitney, Marilyn D., 1991. "Factors Affecting The Demand For California Lottery Tickets," Working Papers 225863, University of California, Davis, Department of Agricultural and Resource Economics.
    9. John F. Scoggins, 1994. "Upping the Ante for Lotto: a Strategy for Enhancing State Revenues," Public Finance Review, , vol. 22(2), pages 258-264, April.
    10. 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.
    11. Levi Pérez & Brad R. Humphreys, 2011. "The Income Elasticity of Lottery: New Evidence from Micro Data," Public Finance Review, , vol. 39(4), pages 551-570, July.
    12. Harriet A. Stranahan & Mary O. Borg, 1998. "Separating the Decisions of Lottery Expenditures and Participation: a Truncated Tobit Approach," Public Finance Review, , vol. 26(2), pages 99-117, March.
    13. William C. Rivenbark, 1998. "The Tax Incidence of Casino Gaming in Mississippi," Public Finance Review, , vol. 26(6), pages 583-598, November.
    14. Kearney, Melissa Schettini, 2005. "State lotteries and consumer behavior," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2269-2299, December.
    15. Ethan Grumstrup & Mark W. Nichols, 2021. "Is video gambling terminal placement and spending in Illinois correlated with neighborhood characteristics?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(2), pages 273-298, October.
    16. Ursula Hauser‐Rethaller & Ulrich König, 2002. "Parimutuel Lotteries: Gamblers' Behavior and the Demand for Tickets," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 223-245, May.
    17. Giebeler, Constanze & Rebeggiani, Luca, 2019. "Who Loves to Gamble? Socio-Economic Factors Determining Gambling Behaviour in Germany," MPRA Paper 94735, University Library of Munich, Germany.
    18. Annemie Maertens & A. V. Chari & David R. Just, 2014. "Why Farmers Sometimes Love Risks: Evidence from India," Economic Development and Cultural Change, University of Chicago Press, vol. 62(2), pages 239-274.
    19. Cho-Min Lin & Kung-Cheng Lin, 2007. "The demand for lottery expenditure in Taiwan: a quantile regression approach," Economics Bulletin, AccessEcon, vol. 4(42), pages 1-11.
    20. Richard F. Dye & Therese J. McGuire, 1992. "The Effect of Earmarked Revenues On the Level and Composition of Expenditures," Public Finance Review, , vol. 20(4), pages 543-556, October.

    More about this item

    Keywords

    Lotto; Lotteries;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:19:y:1993:i:2:p:157-164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Victor Matheson, College of the Holy Cross (email available below). General contact details of provider: https://edirc.repec.org/data/eeaa1ea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.