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

Abstract

Using daily lottery data from Washington State by zip code from January 2011 through mid‐March 2016, we estimate that Powerball income elasticities range from −0.16 to 0.16 as the Powerball jackpot increases from its minimum to $1.5 billion, while Mega Millions income elasticities range from −0.08 to 0.03 as the Mega Millions jackpot increases from its minimum to $640 million. Controlling for jackpot size, each of three major game changes during this time period has a significant effect on own‐game and cross‐game sales. Despite these significant game changes, however, these lotto games are a highly regressive source of revenue for Washington State. (JEL H22, H71, L83)

Does IQ predict engagement with skill‐based gambling? Large‐scale evidence from horserace betting

“…For example, spending tends to increase with income, but slowly. This mirrors previous findings for gambling spend in general (Rude et al, 2014) and for lottery games (Combs & Spry, 2019) and implies that lower income individuals tend to allocate a higher share of their income to gambling (Castrén et al, 2018). Regarding age, engagement with horse betting appears to peak in middle‐age, again similar to findings about participation in gambling generally (Welte et al, 2011).…”

The Income Elasticity of Gross Sports Betting Revenues in Nevada: Short-Run and Long-Run Estimates

“…8 More recently, however, Lee et al (2016) find that Mega Millions is regressive in New Jersey from 2005 to 2010, although less regressive than other lottery products. Combs and Spry (2019) estimate that Powerball revenues have an income elasticity of between −0.16 and 0.16, whereas Mega Millions has income elasticity between −0.08 and 0.03 in Washington State from 2011 to 2016. Mikesell (1994) is one of the few studies that does not conclude lotteries are regressive, finding that lottery sales have an income elasticity of 3.9 in the United States from 1983 to 1991.…”

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“…Even in Spain, the 2005 redesign of El Gordo de la Primitiva that lengthened the odds from approximately 1 in 14 m to 1 in 32 m (Forrest, Pérez, and Baker 2010) (this is less than a three times increase in the difficulty of winning the game's jackpot) was very far from the reduction in the odds of winning La Primitiva 's jackpot. Regarding multistate lottery games, in the United States, major reforms of Powerball in 2013 and Mega Millions in 2015 reduced the odds of winning the jackpot‐from 1/175223509 to 1/292201338 (over 1.6 times), and from 1/175711536 to 1/258890850 (almost 1.5 times), respectively, among other changes such as increasing the entry price and the guarantee jackpot size (Combs and Spry 2019). The European EuroMillions also reduced the probability of winning the jackpot—from 1/117000000 to 1/140000000 (close to 1.2 times)—in successive reforms during the 2010 decade.…”