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The Elasticity of Demand for Lotto Tickets and the Corresponding Welfare Effects

Author

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  • Paul M. Mason

    (University of North Florida)

  • Jeffrey W. Steagall

    (University of North Florida)

  • Michael M. Fabritius

    (University of Mary Hardin-Baylor)

Abstract

The results of an analysis of lotto demand for the state of Florida during the first 254 weeks of its lotto suggest that the price elasticity of demand is near unity when employing a measure of lotto ticket price that is superior (at least for the state of Florida) to that used by others. The results imply that, relative to other states, Florida's lotto has room for increases in the odds to increase the price elasticity of demand to the revenue-maximizing level. However, revenue maximization is not the goal that the state should seek. Rather, the data indicate that Florida could poten tially improve social welfare through increasing the odds, thereby expanding the consumer surplus of ticket buyers and reducing the excess burden associated with the lottery tax.

Suggested Citation

  • Paul M. Mason & Jeffrey W. Steagall & Michael M. Fabritius, 1997. "The Elasticity of Demand for Lotto Tickets and the Corresponding Welfare Effects," Public Finance Review, , vol. 25(5), pages 474-490, September.
  • Handle: RePEc:sae:pubfin:v:25:y:1997:i:5:p:474-490
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    Cited by:

    1. George Geronikolaou & George A. Papachristou, 2007. "On the Demand for Lotteries in Greece," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 6(3), pages 255-259, December.
    2. George Papachristou, 2006. "Is lottery demand elasticity a reliable marketing tool? Evidence from a game innovation in greece," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 53(4), pages 627-640, December.
    3. 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.
    4. repec:bla:coecpo:v:35:y:2017:i:4:p:684-699 is not listed on IDEAS
    5. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    6. Michael A. Trousdale & Richard A. Dunn, 2014. "Demand for Lottery Gambling: Evaluating Price Sensitivity Within a Portfolio of Lottery Games," National Tax Journal, National Tax Association, vol. 67(3), pages 595-620, September.

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