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Should European gamblers play lotto in the USA?

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  • Hofer, Vera
  • Leitner, Johannes

Abstract

Any jackpot building game is designed to have a negative expected return for the gambler, but it can be profitable under certain circumstances. Previous studies have shown that the purchase of a single ticket of US-American state lotteries is sometimes a gamble with a positive expected value. Lottery winnings are not taxed in Europe, which suggests that the profitability of European games may be even higher. We present an exact formula for the calculation of the expected value of a single lotto ticket and find European lottery drawings to be far less profitable for the gambler compared to the US-American lotto market. Those US lotteries that generate profitable drawings are not characterized by higher redistribution rates or by their specific rules, but by the purchasing behavior of the gamblers. These gamblers buy far fewer tickets (per capita) and they barely react to increasing jackpots, even though the jackpots are large enough to cause positive expected winnings.

Suggested Citation

  • Hofer, Vera & Leitner, Johannes, 2011. "Should European gamblers play lotto in the USA?," European Journal of Operational Research, Elsevier, vol. 215(1), pages 181-187, November.
    • Handle: RePEc:eee:ejores:v:215:y:2011:i:1:p:181-187
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    References listed on IDEAS

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