The Elasticity of Demand for Lotto Tickets and the Corresponding Welfare Effects

Paul Mason, Jeffrey Steagall and Michael M. Fabritius
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Michael M. Fabritius: University of Mary Hardin-Baylor

Public Finance Review, 1997, vol. 25, issue 5, 474-490

Abstract: The results of an analysis of lotto demand for the state of Florida during the first 254 weeks of its lotto suggest that the price elasticity of demand is near unity when employing a measure of lotto ticket price that is superior (at least for the state of Florida) to that used by others. The results imply that, relative to other states, Florida's lotto has room for increases in the odds to increase the price elasticity of demand to the revenue-maximizing level. However, revenue maximization is not the goal that the state should seek. Rather, the data indicate that Florida could poten tially improve social welfare through increasing the odds, thereby expanding the consumer surplus of ticket buyers and reducing the excess burden associated with the lottery tax.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:25:y:1997:i:5:p:474-490

DOI: 10.1177/109114219702500502

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