The Economics Of Lotteries: A Survey Of The Literature

Abstract

This chapter surveys the literature on the economics of lotteries and is organized around two central themes. The first section examines the microeconomic aspects of lotteries, including consumer decision-making under uncertainty, price and income elasticities of demand for lottery tickets, cross-price elasticities of lottery tickets to each other and to other gambling products, consumer rationality and gambling, and the efficiency of lottery markets. The second section covers topics related to public finance and public choice, including the revenue potential of lotteries, the tax efficiency and dead-weight loss of lottery games, the horizontal and vertical equity of lotteries, earmarking and the fungibility of lottery revenues, and individual state decisions to participate in participate in public lotteries.

The Effects of Lotto Game Changes and Large Jackpots on Income Elasticities and Sales

“…The literature consistently finds income elasticities of less than one for state lotteries as a whole, with variation in income elasticity across types of lottery games, as discussed in the lottery literature surveys by Grote and Matheson () and Perez and Humphreys (). That is, people in geographical areas with lower income spend a relatively greater percentage of their income on lottery products, resulting in state lotteries being a regressive source of state revenue.…”

“…The literature consistently finds income elasticities of less than one for state lotteries as a whole, with variation in income elasticity across types of lottery games, as discussed in the lottery literature surveys by Grote and Matheson (2013) 1. U.S. Census Bureau.…”

Market Cannibalization Within and Between Gambling Industries: A Systematic Review

“…Similarly, Forrest et al (2004) found that although scratch cards substituted for the National Lottery, they did not cannibalize the Thunderball lottery game. Hence, lottery providers design their product range carefully to maintain acceptable levels of substitution, while increasing overall sales and maximizing related tax revenue (see also Grote & Matheson, 2013;Gulley & Scott, 1993).…”

The demand for gambling in Italian regions and its distributional consequences

“…Despite the relevance of socio‐demographic variables, most of the literature on the drivers of gambling demand focuses on the role of economic conditions, generally measured through income, and reveals that gambling consumption tends to be irregularly distributed across the population, with more disadvantaged groups spending larger shares of their income on gambling consumption (see Grote and Matheson for a review). Most of the international literature on the role of income on gambling demand uses, as a starting point, micro data derived from household surveys (Borg and Mason ; Clotfelter and Cook ; Kitchen and Powells ; Scott and Garen ; Beckert and Lutter ).…”