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It seems strange to me that any lottery would ever let itself get an EV > 1.
by VectorLock 8y ago
It seems strange to me that any lottery would ever let itself get an EV > 1.
- sokoloff 8y agoOver the long run, sure. In the short run, temporary excursions above 1.0 provide huge amounts of free advertising and buzz.
- foobaw 8y agoSometimes, the big lotteries like Powerball and Megamillions do get to EV > 1. Not only is it unreasonable to buy the 240 million tickets for every combination (financially and logistically), but even if you did, if you end up sharing the winnings, then you lose millions. EV > 1 is still not horrible.
- driverdan 8y agoIt only happens when you don't factor in split prizes. When you include the odds of having to share the prize it never goes over 1.
- Nasrudith 8y agoWell it also has to do oddly with 'fairness'. If the pool never grows from failures they are more likely to suspect that it is 'rigged' against them instead of merely being unlucky. But if the pool growth is fixed as either an absolute or a percentage there is no incentive for the running agency to try to make people lose. So long as people keep buying in they really haven't lost anything even if the build up turns it into a sure bet. And winning splitting solves the equilibrium as well in a rather market allegorical way - if everyone puts money into a sure bet the returns eventually diminish.