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#1
08-02-2007, 04:59 PM
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Lotteries
What are your thoughts on playing state lotteries? If we apply the principles of pot odds, if a jackpot was $1,000,000 and the odds of winning were 1,000,000 to 1. Then it is breakeven to play that lottery, in the very very very long run obviously. Since I've learned about pot odds in poker, i've been applying this concept to the lottery. For example, I live in Indiana and our state lottery is up to $41,000,000 and the odds of winning our ~12,500,000 to 1 (per the state lottery website). I see this as a good bet since I'm getting over 3 to 1 for my money, in the very very very long run. Anyway, we only live once, so if I was to win it would be awesome, but if I don't win, I'm only out that $5 or $10. Thoughts?
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#2
08-02-2007, 05:49 PM
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Re: Lotteries
Rule number one of economics: "There is no such thing as a free lunch."
Money doesn't appear out of thin air. In the lottery it comes the players. The house will not pay out more than they receive (seriously, you're dealing with the government... wouldn't cutting taxes or something be a higher priority on the budget?). THINK about it... I almost feel stupider having to seriously answer this. I'm not sure how to reconcile the odds they state with the size of the jackpot (I don't have enough information), but I can state with 99.9% certainty that playing state lotteries is not +EV.
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#3
08-02-2007, 06:28 PM
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Re: Lotteries
So what happens is that on occasion nobody will hit the jackpot. The lottery takes that money and rolls it over into the next jackpot. Its as if 20 people were at a hold-em table and they all had to ante, but then 10 of them had their cards taken away. Then you walked over and the dealer asked if you wanted two off the top to play the hand. It is very possible for the state lottery to be +EV, so long as nobody hits a couple of weeks in a row.
The rubs are two-fold: 1. You must consider the odds of splitting the jackpot. If the kitty gets humongous, more people buy tickets and you're more likely to split. 2. Uncle Sam has his way with lottery winners. I have never hit the lottery so I don't know what we're talking about here, but I don't think 50% is unreasonable.
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#4
08-03-2007, 11:37 AM
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Re: Lotteries
1. I agree that more people will buy tickets once the jackpot gets really big
2. Uncle sam would take 35% (top tax bracket) and it is tax free in the state. Still I could live with a net amount of about $13,000,000 if I take the cash option. This assumes that the PV of $40MM is $20MM which is really conservative I think and a tax rate of 35%. ($20MM * (1-.35)).
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#8
08-03-2007, 09:34 AM
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Re: Lotteries
I understand the money comes from the other players, but not me. It's the same as money coming from other poker players going into the pot. Same Principle! If you feel more stupid (not stupider!) then don't answer the question. I view the government as the rake. Even considering present value issues, the cash payout net of taxes will be >= the odds against winning. Thus my odds are greater than 1-1. The whole point of the discussion was to get peoples views on playing the lottery. Often times you have nits who say the lottery is a waste of money etc. etc. And other times people play the lottery every week.
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#9
08-06-2007, 04:58 AM
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Re: Lotteries
[ QUOTE ]
I understand the money comes from the other players, but not me. It's the same as money coming from other poker players going into the pot. Same Principle! If you feel more stupid (not stupider!) then don't answer the question. I view the government as the rake. [/ QUOTE ] I'm being levelled right? Man I love jokes! But seriously, poker is only +EV because we have a theoretical edge over the opposition (i.e. we play good, they play bad -- don't even think about correcting "good" to "well"). What's your edge playing the lottery sir? Are you really good at picking numbers? Fibonacci Sequence ftw! edit: Note that the money does, in fact, come from you (in addition to the other players), contrary to your quoted assertion. You are presuming that you buy tickets in order to play, correct? [ QUOTE ] Even considering present value issues, the cash payout net of taxes will be >= the odds against winning. Thus my odds are greater than 1-1. [/ QUOTE ] On second thought, the error in my reasoning is now clear. Each lottery ticket is a +EV play, so you should buy a million of them. Even if you're only pushing a marginal edge of two cents per ticket, it's still $20,000 in Sklanskybucks! Now please go die in a fire. edit^2: I see what you're getting at about being able to calculate the odds of winning the jackpot (getting all the numbers) relative to how much each ticket costs and the size of the pot. As other posters have mentioned, you must take into consideration taxes owed and the time value of money as well as the probability of splitting the pot (which increases as the pot grows big in these "+EV" situations because everyone wants a piece). Kind of like a poker site offering a $1 million guaranteed tournament that attracts more than a sufficient number of players... DUCY?
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#10
08-06-2007, 04:55 PM
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Re: Lotteries
A lottery can easily become +EV. Once the cash prize (-taxes) (-odds of splitting) reaches a certain level, there can be big money to be won.
There have been syndicates who have tried to buy all the combinations when the numbers got high enough. One group was only able to get around 75% (72% or 78% I forget which) of the total bought by the time it was drawn. They managed to hit it, and from then on the rules on how to buy tickets were changed. (They were buying massive blocks at lottery headquarters). Of course, when you are talking about one ticket, does it matter that every 12th million drawing you will be ahead?
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