When Are State Lotteries a Good Bet?

Anthony Krautmann and James Ciecka
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James Ciecka: De Paul University

Eastern Economic Journal, 1993, vol. 19, issue 2, 157-164

Abstract: 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.

Keywords: Lotto; Lotteries (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 1993
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:19:y:1993:i:2:p:157-164

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