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Optimal Lottery Design for Public Financing

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  • Akira Maeda

Abstract

This article develops a model of optimal lottery design for public financing, on the assumption that economic agents view buying lottery tickets as a form of entertainment. Given that lotteries are optimally designed, it offers two findings: (1) the fundraising potential of a lottery is independent of its type (specifically, of whether it is a fixed‐prize type or a pari mutuel); and (2) the ratio of the optimal winning prize amount in each prize class to total lottery sales is equalised to the elasticity of demand for lottery ticket purchases with respect to the winning prize in each prize class.

Suggested Citation

  • Akira Maeda, 2008. "Optimal Lottery Design for Public Financing," Economic Journal, Royal Economic Society, vol. 118(532), pages 1698-1718, October.
    • Handle: RePEc:wly:econjl:v:118:y:2008:i:532:p:1698-1718
    DOI: 10.1111/j.1468-0297.2008.02186.x
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    References listed on IDEAS

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    Cited by:

    1. Shunta Akiyama & Mitsuaki Obara & Yasushi Kawase, 2022. "Optimal design of lottery with cumulative prospect theory," Papers 2209.00822, arXiv.org.
    2. Alexis DIRER, 2010. "Equilibrium Lottery Games and Preferences Under Risk," LEO Working Papers / DR LEO 550, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    3. Martin Kolmar & Andreas Wagener, 2012. "Contests and the Private Production of Public Goods," Southern Economic Journal, John Wiley & Sons, vol. 79(1), pages 161-179, July.
    4. Giebe, Thomas & Schweinzer, Paul, 2014. "Consuming your way to efficiency: Public goods provision through non-distortionary tax lotteries," European Journal of Political Economy, Elsevier, vol. 36(C), pages 1-12.
    5. Paan Jindapon & Zhe Yang, 2020. "Free riders and the optimal prize in public‐good funding lotteries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1289-1312, September.

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