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A Method for Winning at Lotteries

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  • Steven D. Moffitt
  • William T. Ziemba

Abstract

We report a new result on lotteries --- that a well-funded syndicate has a purely mechanical strategy to achieve expected returns of 10\% to 25\% in an equiprobable lottery with no take and no carryover pool. We prove that an optimal strategy (Nash equilibrium) in a game between the syndicate and other players consists of betting one of each ticket (the "trump ticket"), and extend that result to proportional ticket selection in non-equiprobable lotteries. The strategy can be adjusted to accommodate lottery taxes and carryover pools. No "irrationality" need be involved for the strategy to succeed --- it requires only that a large group of non-syndicate bettors each choose a few tickets independently.

Suggested Citation

  • Steven D. Moffitt & William T. Ziemba, 2018. "A Method for Winning at Lotteries," Papers 1801.02958, arXiv.org.
    • Handle: RePEc:arx:papers:1801.02958
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    References listed on IDEAS

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    1. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: A Survey of the Literature," Working Papers 1109, College of the Holy Cross, Department of Economics.
    2. William T Ziemba, 2017. "The Adventures of a Modern Renaissance Academic in Investing and Gambling," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10242, August.
    3. L. C. MacLean & W. T. Ziemba & G. Blazenko, 1992. "Growth Versus Security in Dynamic Investment Analysis," Management Science, INFORMS, vol. 38(11), pages 1562-1585, November.
    4. Cook, Philip J & Clotfelter, Charles T, 1993. "The Peculiar Scale Economies of Lotto," American Economic Review, American Economic Association, vol. 83(3), pages 634-643, June.
    5. Donald B. Hausch & William T. Ziemba & Mark Rubinstein, 1981. "Efficiency of the Market for Racetrack Betting," Management Science, INFORMS, vol. 27(12), pages 1435-1452, December.
    6. Raymond D. Sauer, 1998. "The Economics of Wagering Markets," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2021-2064, December.
    7. Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-174, Spring.
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