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State Lottery Revenue: The Importance of Game Characteristics

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  • Thomas A. Garrett
  • Russell S. Sobel

Abstract

Previous studies have found that lottery ticket sales are influenced by certain socioeconomic characteristics of the population. The authors extend the state lottery literature by examining how lottery game characteristics, such as the overall expected value, the top prize, and the total number of combinations, influence ticket sales after controlling for socioeconomic variables. They perform an empirical analysis on a unique set of data that include information for 135 online lottery games in the United States. The results show that ticket sales are significantly influenced by the size of the top prize and the odds of winning it, but ticket sales are not significantly affected by the expected value of the lower prizes. The out-of-sample predictive power of the model is then tested using a real-world example of changes to the prize and odds structure of PowerBall.

Suggested Citation

  • Thomas A. Garrett & Russell S. Sobel, 2004. "State Lottery Revenue: The Importance of Game Characteristics," Public Finance Review, , vol. 32(3), pages 313-330, May.
    • Handle: RePEc:sae:pubfin:v:32:y:2004:i:3:p:313-330
    DOI: 10.1177/1091142104264423
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    3. Raviv, Yaron & Virag, Gabor, 2009. "Gambling by auctions," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 369-378, May.
    4. 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.
    5. Brian A. Polin & Eyal Ben Isaac & Itzhak Aharon, 2021. "Patterns in manually selected numbers in the Israeli lottery," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(4), pages 1039-1059, July.
    6. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    7. Sara Capacci & Emanuela Randon & Antonello Eugenio Scorcu, 2017. "Are Consumers More Willing to Invest in Luck During Recessions?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(1), pages 25-38, March.
    8. Tony Addison & Abdur Chowdhury, 2003. "A Global Lottery and a Global Premium Bond," WIDER Working Paper Series DP2003-80, World Institute for Development Economic Research (UNU-WIDER).
    9. 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;National Tax Journal, vol. 67(3), pages 595-620, September.
    10. Victor Matheson & Kent Grote, 2009. "Spreading the Fortune: The Distribution of Lottery Prizes across Countries," Working Papers 0904, College of the Holy Cross, Department of Economics.
    11. Richard A. Dunn & Michael A. Trousdale, 2015. "Estimating the Demand for Lottery Gambling," Public Finance Review, , vol. 43(6), pages 691-716, November.
    12. repec:cup:judgdm:v:16:y:2021:i:4:p:1039-1059 is not listed on IDEAS
    13. Mao, Luke Lunhua & Zhang, James J. & Connaughton, Daniel P., 2015. "Sports gambling as consumption: Evidence from demand for sports lottery," Sport Management Review, Elsevier, vol. 18(3), pages 436-447.

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