When you should play lottery?
Nowadays, lottery is quite a popular game in many places. A lot of people were infatuated to this game and in the hope of become millionaire by $1. Now, let’s view playing lottery as a business and evaluate it in economic way of thinking.
Take MEGA million as an Example:
(Up to I post, the jackpot has reached $88,000,000)
Cost: $1
Revenue: 88,000,000 / 175,711,536 + 250,000 / 3,904,701 + 10,000 / 689,065 + 150 / 13,781 + 7 / 306 + 10 / 844 + 3 / 141 + 2 / 75 = 0.5008 + 0.0640 + 0.0145 + 0.0109 + 0.0227 + 0.0118 + 0.0213 + 0.0267 = $0.6727
Net income = $0.6727 – $1 = $-0.3273
Based on this amount of the Jackpot, the net income is negative. To an economist, this lottery is a bad business which will cause the loss of money. So compared with lottery, an economist would rather like to steal cars. But, you may notice that in the equation of revenue, there is a variable which can affect the amount of revenues and net income: that is Jackpot. So it is possible for the net income become positive.
If the net income >= $0:
Revenue = net income + cost = $0 + $1 = $1 = Jackpot / 175,711,536 + 0.1719
Jackpot = $145,506,723
So when the amount of Jackpot is more than $145,506,723, the net income will be positive, which means that lottery will become a profitable business and you can join it.
Further thinking:
However, even when the net benefit is negative, there are still thousands of thousands people play this game. Do each one of them has none economic knowledge? Definitely, yes, some of them have. But why they still would like to “waste” their money in this losing money game? If the economic consideration is not the only reason that affect a customer to make a decision, what else?
I think the psychology of the customer should be the answer. Because these one dollars give them the hopes of becoming millionaires out of “nothing”, although the chance of it is really, really small. After all, better than no hope!
Should there be some thing else?
2 comments:
I believe that one reason so many people play the lottery, aside from the chance of getting rich quick (judging by infomercials at 3 AM, a very common idea), there are hidden benefits of playing the lottery. Generally, the lottery is used as a tax-alternative to raising funds for a state. Because some people may lose $50 a week on the lottery, which of course is a personal choice, people that don't play the lottery can pay less in taxes, but have higher benefits. People also continually gamble because they are always waiting for that one big win. They take sunk costs into account and illogically feel that because of 200 previous losses, they are due for a win. I also believe that the amount of money one some factor in for determining marginal benefits should be higher because a great deal of lottery winnings will be taken out in the form of taxes. Then there would be the cost of added taxes when you try to spend the money, and heaven forbid you want to leave some money in your will. Because of taxes alone, winnings can drop in half.
I think why people play the lottery is that everybody hopes and thinks that they will be the next one to hit big. When I play the lottery sometimes that is what is going through my head. Also I guess I really don't look at the economic tinking.When I play it is always when the jackpot is a big vlaue and I don't play when the value is smaller but that should be the time you play because the chances are better.
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