When Are State Lotteries a Good Bet?
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.
Volume (Year): 19 (1993)
Issue (Month): 2 (Spring)
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- 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.
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