An Uncanny Coincidence
So where do people get the inspiration for choosing lottery numbers? For some, revelaton is through fortune cookies.
BTW - The Mega Millions Lottery is changing its structure, reducing the odds of winning from 1:135,145,920 to 1:175,711,536, but increasing its minimum payout to $12 million. This was in interesting comment from a regular player.
Clinton Township used car dealer Bob Bartolomucci likes the bigger secondary prizes. "That's the only reason I play Mega Millions -- to win the second-place money," he said.
Interesting perspective. The expected value of the top prize is at least roughly 7.4¢. (The top prize increases each drawing as long as there are no winning combinations.) The expected value of the second and third prize is 6.6¢ and .87¢ respectively (yes, the expected value of the third prize is less than 1¢). Were Vegas to offer similar odds the casino owners would be thrown in jail for fraud.
Update: Here's an Excel spreadsheet used to determine expected values.
It is funny that local TV stations run segments about how bad the odds in the lottery only when the jackpot is very high and the lottery isn't such a bad deal. It is pretty common for such lotteries to have payouts such that, if you were the only one betting, it would have an expected payout greater than a dollar on a dollar bet. For the example you gave, all it would take would be a payout of $135 million. The highest previous jackpot Mega Millions jackpot was $362 million. The fact that payouts must be spit if more than one person hits it and the 20 year payout period does reduce the expected value though.
A similar situation can occur with "exacta" payouts at racetracks. The payout can build up such that the expected value on a $2.00 bet is greater than $2.00. I knew someone who went to the tracks with an investment group to bet every combination of such exactas. A lot of filling out forms in hotel rooms. The investment group would have bet every combination of certain high payout state lotteries if it were allowed.
People aren't totally stupid so they generally don't bet when the payout is relatively low. Raising the odds and increasing the minimum payout is a way for Mega Millions to get the payout into a range where a lot of people generally play the lottery. It would be interesting to see how betting behavior changes with the new odds.
Posted by: joe o | May 11, 2005 at 04:30 PM