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The Peculiar Scale Economies of Lotto

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Author Info
Philip J. Cook
Charles T. Clotfelter

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Abstract

The best-selling lottery game in the United States is lotto, a parimutuel game of long odds and large jackpots. Unlike in the other popular lottery games (numbers and instant). there is a strong tendency for per-capita lotto sales to increase with the size of the population base. The fact that the jackpot also tends to increase with population size is not a complete explanation, since the probability of winning tends to be inversely proportional to state population. our explanation for why the games are more successful in large states is that players tend to judge the likelihood of winning based on the frequency with which someone wins; then a larger state can offer a game at longer odds but the same perceived probability of winning as a smaller state.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3766.

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Date of creation: Jul 1991
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Handle: RePEc:nbr:nberwo:3766

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279. [Downloadable!] (restricted)
  2. Charles T. Clotfelter & Philip J. Cook, 1988. "Implicit Taxation in Lottery Finance," NBER Working Papers 2246, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Baucells, Manel & Weber, Martin & Welfens, Frank, 2007. "Reference Point Formation Over Time: A Weighting Function Approach," Sonderforschungsbereich 504 Publications 07-43, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  2. Kam Yu, 2008. "Measuring the Output and Prices of the Lottery Sector: An Application of Implicit Expected Utility Theory," NBER Working Papers 14020, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Chew Soo Hong & Guofu Tan, 2004. "The Market for Sweekstakes," IEPR Working Papers 04.4, Institute of Economic Policy Research (IEPR). [Downloadable!]
  4. repec:bep:eaptop:v:4:y:2004:i:1:p:1269-1269 is not listed on IDEAS
    Other versions:
  5. Jim Landers, 2008. "What’s the potential impact of casino tax increases on wagering handle: estimates of the price elasticity of demand for casino gaming," Economics Bulletin, Economics Bulletin, vol. 8(6), pages 1-15. [Downloadable!]
  6. Thomas A. Garrett & Cletus C. Coughlin, 2007. "Inter-temporal differences in the income elasticity of demand for lottery tickets," Working Papers 2007-042, Federal Reserve Bank of St. Louis. [Downloadable!]
  7. Colin Camerer, 1998. "Bounded Rationality in Individual Decision Making," Experimental Economics, Springer, vol. 1(2), pages 163-183, September. [Downloadable!] (restricted)
  8. Victor Matheson & Kent Grote, 2009. "Spreading the Fortune: The Distribution of Lottery Prizes across Countries," Working Papers 0904, College of the Holy Cross, Department of Economics. [Downloadable!]
  9. Hasret Benar & Glenn P. Jenkins, 2006. "The Economics of Casino Taxation," Working Papers 1057, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
  10. Camerer, Colin F., 1998. "Prospect Theory in the Wild: Evidence From the Field," Working Papers 1037, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  11. Victor Matheson & Kent Grote, 2004. "Dueling Jackpots: Are Competing Lotto Games Complements or Substitutes?," Working Papers 0406, College of the Holy Cross, Department of Economics. [Downloadable!]
    Other versions:
  12. Alexander Matros & Wooyoung Lim & Theodore Turocy, 2009. "Raising Revenue With Raffles: Evidence from a Laboratory Experiment," Working Papers 377, University of Pittsburgh, Department of Economics, revised Feb 2009. [Downloadable!]
  13. George Papachristou, 2006. "Is lottery demand elasticity a reliable marketing tool? Evidence from a game innovation in greece," International Review of Economics, Springer, vol. 53(4), pages 627-640, December. [Downloadable!] (restricted)
  14. Walther Herbert, 2005. "Optimal Taxation of Gambling and Lotto," Working Papers geewp47, Vienna University of Economics and B.A. Research Group: Growth and Employment in Europe: Sustainability and Competitiveness. [Downloadable!]
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