Comments on: Lottery as an Investment

By: Powermillions

Powermillions — Wed, 14 Jul 2010 02:03:46 +0000

Do not let math fool you. Someone will win, that is a fact.

By: Tanya Khovanova’s Math Blog » Blog Archive » The Expected Return on Lotteries

Tue, 02 Feb 2010 15:39:25 +0000

[…] one of my previous pieces, I discussed returns on the Mega Millions lottery game, assuming that you buy a small number of tickets. In such a case winning the jackpot has zero […]

By: Bill

Bill — Tue, 19 Jan 2010 16:22:26 +0000

I agree with JS. If a lottery win would change my life drastically, while the financial loss from a losing ticket would barely be felt, it doesn’t much matter whether the payoff matches the actual mathematical odds.

As a kid, I had no conceptions of such things, and only saw the lottery as a fool’s game. My mother sent me to the store for a lottery ticket once. I had to choose 7 numbers from 01 to 80. To make my point, I selected the numbers 01 02 03 04 05 06 07. She got angry with me. “That’ll never come up.” I was not able to convince her that my picks had the exact same chances as the family birthdays or any other combination of numbers. My father’s view was more philosophical. He used to say “I only ever buy one ticket, because to win would take a miracle from God, and God only needs one ticket.”

Today, I play the scratch-off tickets. I like your image of a ticket to a movie that is played in your head. That’s exactly what it is for me. I buy one ticket at a time, and hold on to it for about a week. I leave it out on my desk, unscratched, and every time I look at it, it makes me smile. I might already be incredibly wealthy, after all.

By: js

js — Wed, 13 Jan 2010 16:29:40 +0000

Any expected value calculation, particularly for very large lotteries, should treat the value of a win as much larger than its actual dollar value - enormously so. In fact, it’s difficult to pin a value on the independence and opportunity that such a prize affords. So I think you can be sane and mathematically literate and still regard a lottery ticket purchase as a reasonable choice, not just based on entertainment value, as long as you can afford it without ruinous consequences.

By: sympath

sympath — Tue, 12 Jan 2010 05:48:11 +0000

It’s not as simple as 50% going to prizes. That’s on average. In many large jackpot lottery games (like MegaMillions), the max payout starts very low, but if no one wins, the jackpot goes up. When there’s a collective losing streak, the payout can get large enough to exceed the odds, so that one could theoretically buy every combination and guarantee a prize larger than the investment. EXCEPT, when the prize gets large, more people play, and the chances of having to share the prize increase. The prize ends up being half the income from the entire run, but you don’t have to play at the beginning when the ‘investment’ is particularly bad. Thus I justify my occasional ticket purchase.

By: Pseudonym

Pseudonym — Sat, 02 Jan 2010 23:54:30 +0000

I’ve known people in jurisdictions where the lottery has no “profits” as such: all proceeds go to fund local government services. In such a location, partaking in the lottery could be seen to be entirely practical. It would be a voluntary tax for those who believe that schools are under-funded.

What’s interesting to me is that it’s NOT true that there is essentially no strategy for playing a lottery. Consider, for example, the degenerate case where you decide to buy 175,711,536 tickets in one draw. It would be incorrect to buy them all with the same combination of numbers. Buying one combination each would maximise your return.

Obviously, buying that many tickets is not practical. But if you buy fewer tickets, then the goal is not to improve your odds of winning, but reduce the probability of the “worst case”, where you don’t get your expected 18c return.

If you ignore the “mega ball” for simplicity, the problem boils down to the combinatorial covering design problem.

By: Eka

Eka — Fri, 01 Jan 2010 01:42:45 +0000

I havent been able to digest the calculation of the expected payout since i have no understanding in the game..
One thing for sure, i do agree with putting lottery as a mere entertainment but not an investment. Dont let lottery destroy our mood–that if we keep on failing..

By: colorblind

colorblind — Thu, 31 Dec 2009 23:44:04 +0000

“for all practical purposes”

Playing the lottery is NEVER a practical purpose.

I remember back in college when I had to do laundry at the local laundromat. In those instances when I would forget my reading materials for the wait, I would head over to the convenience store next door and pick up a $2 crossword ticket. For that particular scratch-off, 67% goes back as prizes, about 30% are winners and the ticket, if played “correctly” (you scratch off letters to see how many “words” you can find in the corresponding “crossword” grid ), would take about 20 minutes to play - just about enough time for my laundry load to finish. If I won anything, I’d go back to the store, and use the winnings to purchase another ticket for the drying time. At worst, I was mildly entertained for $2. In a few instances, I won $20 - $50 and used it to buy flowers at the shop for my girlfriend [which was worth more than the winnings ]. For me personally, the entertainment value easily offset the expected loss of 68 cents.