Rationality and efficiency in lotto games

Examining the ‘Halo Effect’ in lotto games

“…One notable exception to this behavior, as described by Farrell, et al (1999) and Matheson and Grote (2005), is the tendency for drawing right after a large jackpot has been won to experience unusually high ticket sales. This phenomenon is known as the "Halo Effect."…”

“…Since the price of a lotto ticket and the odds of winning remain fixed regardless of the size of the jackpot, the expected return of purchasing a lotto ticket nearly always increases along with the size of the jackpot. Numerous authors including Scott and Gulley (1995), Farrell, et al (1999), Forrest, et al (2002, and Matheson and Grote (2005) have noted that lotto players generally behave in ways consistent with basic economic principles by responding to the higher expected return provided by larger jackpots with increasing ticket purchases while reducing ticket purchases when the expected return falls.…”

“…This phenomenon is known as the "Halo Effect." In their examination of nearly 11,000 lotto drawings, Matheson and Grote (2005) find only 173 cases where ticket sales dropped despite an increase in the jackpot. Fully two-thirds of these cases (118 of 173) occur in the time period around a large jackpot being won demonstrating the 4 halo effect.…”

The ‘Who and Why’ of Lottery: Empirical Highlights From the Seminal Economic Literature

“…Lottery jackpots also appear to have persistent positive effects on demand. Farrell et al (2000) and Matheson and Grote (2005) found an unusually high level of lotto sales after a large jackpot has been won. This 'Halo Effect' is also discussed in Grote and Matheson (2007) who offer several explanations for this phenomenon besides the possibility of addiction driving these results.…”

Own- And Cross-Price Elasticities for Games Within a State Lottery Portfolio

“…Rollover of the jackpot fund, when there are no winners, results in the augmentation of the jackpot for the following draw and, if there is still no winner, another rollover. In this way, exceptional jackpots can develop within a "draw cycle" (Matheson and Grote 2005). 3 In each game, there are also several prize tiers below the jackpot level for players who match a smaller number of numbers (as in other countries, the more numbers a player matches, the more he or she stands to win).…”