The Effect of New Jersey Lottery Promotions on Consumer Demand and State Profits

Kathryn L Combs, Jocelyn Elise Crowley () and John A Spry
Additional contact information
Kathryn L Combs: Department of Finance, University of St. Thomas, 1000 LaSalle Avenue, Minneapolis, MN 55403, USA. E-mails: klcombs@stthomas.edu; jaspry@stthomas.edu
Jocelyn Elise Crowley: Public Policy Program, The Edward J. Bloustein School of Planning and Public Policy, Rutgers, The State University of New Jersey, 33 Livingston Avenue, New Brunswick, New Jersey, 08901 USA.
John A Spry: Department of Finance, University of St. Thomas, 1000 LaSalle Avenue, Minneapolis, MN 55403, USA. E-mails: klcombs@stthomas.edu; jaspry@stthomas.edu

Eastern Economic Journal, 2014, vol. 40, issue 3, 326-348

Abstract: We estimate elasticities of demand for New Jersey’s Pick 3 and Pick 4 midday/evening numbers games by exploiting random price variation generated by episodic promotions for each game. These Pick 3 Green Ball and Pick 4 Red Ball promotions lower the price of a lottery ticket for an evening numbers game by increasing prize payments during the 28-day promotion periods. The own-price elasticities of demand for the evening Pick 3 and Pick 4 games are both approximately –0.5. During the promotions, the loss in profit margins outweighs the gain in sales because of this inelastic demand. However, the combined effects of lower evening Pick 3 profits and increased sales of complementary products boost lottery profits by $30,000 per day, or $840,000 during the 28 days of the Green Ball promotion, while the combined effects of lower evening Pick 4 profits and reduced sales of substitute products decrease lottery profits by $129,000 per day, or $3.61 million during the 28 days of the Red Ball promotion. If higher sales after the promotion are included, the total increase in profits potentially reaches $14.48 million under the Green Ball game, while the Red Ball promotion loses money for the lottery even considering its positive lagged effect.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.palgrave-journals.com/eej/journal/v40/n3/pdf/eej201339a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/eej/journal/v40/n3/full/eej201339a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:easeco:v:40:y:2014:i:3:p:326-348

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/41302

Access Statistics for this article

Eastern Economic Journal is currently edited by Allan Zebedee and Cynthia Bansak

More articles in Eastern Economic Journal from Palgrave Macmillan, Eastern Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().