5 ms·

I understand the opposite: the State didn't lose any money, (but didn't make any money from these people winning, either); it made money from lottery as usual,

I understand the opposite: the State didn't lose any money, (but didn't make any money from these people winning, either); it made money from lottery as usual, but not from these people. (There's an implication that more people in general bought tickets, didn't win, and so the organizer made money from those - but it's not entirely clear.)

thaumasiotes 7y ago
The state makes money from every ticket purchased. The lottery simply pays out a fixed percentage of ticket revenue. More ticket sales means more money to the state, regardless of whether those tickets, when purchased, had an expected positive or negative return.
- pliny 7y ago
  If the ticket has an expected positive return for the buyer, then the state must be losing money.
  - progval 7y ago
    It has an expected positive return only on the days there was a Rolldown. Money came from people who played on days there wasn't one.
  - zawerf 7y ago
    I feel like mathematically, you must be right. One of the sides must be calculating their expected value wrong. For example I can offer to pay a $3 jackpot (split across winners) for a $1 game for guessing heads or tails. If more than 3 people play the game, I make money. For each player, the naive way to calculate expected return is $3 * 0.5 + $0 * 0.5 - $1 = $0.5. So the players also think they are making money. But once you account for jackpot splitting, that "expected value" isn't positive anymore. To calculate this correctly, the player (who has less information) need some way to model the distribution of the number of other players.
    - thaumasiotes 7y ago
      > mathematically, you must be right. One of the sides must be calculating their expected value wrong. He isn't right. The state doesn't work with expected values in any way. Money comes in via ticket sales, some of it goes into the state budget, the rest goes out as lottery payouts. There is no element of chance in any of that. As you point out here and I point out elsewhere, the expected value of a ticket for the purchaser depends on the total number of tickets sold, which has been mostly elided from the discussion. In fact, it's mostly irrelevant as to this past event; at the actual ticket volumes, returns really were positive on the days in question.
      - pliny 7y ago
        The way the game is presented in the article is that the low payout numbers are fixed (so a 3 match on a given rolldown game pays out $50 regardless of how many winners there are). This is consistent with the state lotteries I know. In this scenario every ticket sold causes the state to lose money, on average.
        chrismcb 7y ago
        No. Every ticket sold causes the prize pool to lose money. The amount the state makes increases.
      - zawerf 7y ago
        It's a zero sum game. If one side is positive, the other side must be negative. If jackpot isn't paid out, state gets (ticket_sales), players in total gets (-ticket_sales). If jackpot is paid out, state gets (ticket_sales - jackpot), players gets (jackpot - ticket_sales). The winning players get ((jackpot - winning_ticket_sales) / num_winners) each, the rest gets (losing_ticket_sales). Either way the expected value for an individual player is always the opposite sign of the expected value of the state. The interpretation that people might be using is that: when the tickets sold is low, it's positive expected value for the players. When sales cross the jackpot, it's positive expected value for the state. But then it becomes negative value for the player! There's no point in time where both sides are winning. (And of course that interpretation is pretty meaningless because you don't want to calculate the expected return based on the current number of tickets sold. You want the forecast of the eventual number of tickets sold. The state never really loses, even at the start because they have a pretty good idea of what this number will be in the end)
  - thaumasiotes 7y ago
    You're not thinking about this the right way. The ticket doesn't have a positive expected return as a structural feature of the lottery. It has a positive expected return conditional on the total number of tickets sold being less than a fixed value.
  - steventhedev 7y ago
    For that particular round of the game, yes. Overall? No, unless the game is very badly designed. The whole situation arises from rolling over the losses between rounds, which "sweetens" the pot for intelligent players. It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts of 8mm).
    - thaumasiotes 7y ago
      > It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts of 8mm). ...wouldn't that be better under all possible circumstances? Would you rather have $10 million or $2 million?
      - steventhedev 7y ago
        whooops! 100mm with 99mm payout vs 10mm and 8.5mm payout then...
  - chrismcb 7y ago
    The prize pool losses the money, not the state. This was a mechanism to keep the overall prize pool from getting too large. Of one person won the main prize, then they would get a car majority of the prize pool. Otherwise the prize pool was essentially distribute among all the players. Yes technically if enough people played, they could have spent more than the prize pool, but, if enough people played, then the chance that one person won goes up as well.
  - Piskvorrr 7y ago
    The ticket only has an expected positive value return under certain limited circumstances, not all the time (i.e. when jackpot has not been won for a time). State is not losing money in total - just moving around the distribution of prizes, but the sum total remains constant. If anyone would be losing money here, it would be a hypothetical winner of the jackpot - but as the jackpot is only redistributed when there is no such winner for some time...
  - diminoten 7y ago
    No, because the payout for the state (the amount they planned on losing) was always the same. The amount was "lost" regardless, it just depended on if it went to one big winning ticket or hundreds/thousands of smaller winning tickets.
  - eridius 7y ago
    For this to be true, every additional winning ticket purchased must result in a net loss to the state. But it doesn't, every additional winning ticket purchased is money going to the state. The losers in this case are the other people with winning tickets, because their payouts become smaller¹. ¹Well, given one assumption about how the game is run. The other assumption is that the 3- and 4-number winning tickets have a fixed payout calibrated such that this doesn't fully exhaust the pot, and in this case the "loser" for each additional winning ticket is whoever wins the full pot next time as the pot will be lower than it would otherwise have been.
    - zaroth 7y ago
      I think in this case the winnings were fixed and the surge in sales in Rolldown days would cause the pot to be drawn down much more, meaning a longer delay before the next Rolldown day. So Rolldowns probably became less frequent, but otherwise the lottery made their money and everyone took home exactly the winnings they would have in that particular game.
- deleted 7y ago
  [deleted]
M2Ys4U 7y ago
Are state lottery ticket purchases taxed? That'd also bring in a chunk of change.

thaumasiotes 7y ago

The state makes money from every ticket purchased. The lottery simply pays out a fixed percentage of ticket revenue. More ticket sales means more money to the state, regardless of whether those tickets, when purchased, had an expected positive or negative return.

pliny 7y ago
If the ticket has an expected positive return for the buyer, then the state must be losing money.
- progval 7y ago
  It has an expected positive return only on the days there was a Rolldown. Money came from people who played on days there wasn't one.
- zawerf 7y ago
  I feel like mathematically, you must be right. One of the sides must be calculating their expected value wrong. For example I can offer to pay a $3 jackpot (split across winners) for a $1 game for guessing heads or tails. If more than 3 people play the game, I make money. For each player, the naive way to calculate expected return is $3 * 0.5 + $0 * 0.5 - $1 = $0.5. So the players also think they are making money. But once you account for jackpot splitting, that "expected value" isn't positive anymore. To calculate this correctly, the player (who has less information) need some way to model the distribution of the number of other players.
  - thaumasiotes 7y ago
    > mathematically, you must be right. One of the sides must be calculating their expected value wrong. He isn't right. The state doesn't work with expected values in any way. Money comes in via ticket sales, some of it goes into the state budget, the rest goes out as lottery payouts. There is no element of chance in any of that. As you point out here and I point out elsewhere, the expected value of a ticket for the purchaser depends on the total number of tickets sold, which has been mostly elided from the discussion. In fact, it's mostly irrelevant as to this past event; at the actual ticket volumes, returns really were positive on the days in question.
    - pliny 7y ago
      The way the game is presented in the article is that the low payout numbers are fixed (so a 3 match on a given rolldown game pays out $50 regardless of how many winners there are). This is consistent with the state lotteries I know. In this scenario every ticket sold causes the state to lose money, on average.
      - chrismcb 7y ago
        No. Every ticket sold causes the prize pool to lose money. The amount the state makes increases.
    - zawerf 7y ago
      It's a zero sum game. If one side is positive, the other side must be negative. If jackpot isn't paid out, state gets (ticket_sales), players in total gets (-ticket_sales). If jackpot is paid out, state gets (ticket_sales - jackpot), players gets (jackpot - ticket_sales). The winning players get ((jackpot - winning_ticket_sales) / num_winners) each, the rest gets (losing_ticket_sales). Either way the expected value for an individual player is always the opposite sign of the expected value of the state. The interpretation that people might be using is that: when the tickets sold is low, it's positive expected value for the players. When sales cross the jackpot, it's positive expected value for the state. But then it becomes negative value for the player! There's no point in time where both sides are winning. (And of course that interpretation is pretty meaningless because you don't want to calculate the expected return based on the current number of tickets sold. You want the forecast of the eventual number of tickets sold. The state never really loses, even at the start because they have a pretty good idea of what this number will be in the end)
- thaumasiotes 7y ago
  You're not thinking about this the right way. The ticket doesn't have a positive expected return as a structural feature of the lottery. It has a positive expected return conditional on the total number of tickets sold being less than a fixed value.
- steventhedev 7y ago
  For that particular round of the game, yes. Overall? No, unless the game is very badly designed. The whole situation arises from rolling over the losses between rounds, which "sweetens" the pot for intelligent players. It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts of 8mm).
  - thaumasiotes 7y ago
    > It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts of 8mm). ...wouldn't that be better under all possible circumstances? Would you rather have $10 million or $2 million?
    - steventhedev 7y ago
      whooops! 100mm with 99mm payout vs 10mm and 8.5mm payout then...
- chrismcb 7y ago
  The prize pool losses the money, not the state. This was a mechanism to keep the overall prize pool from getting too large. Of one person won the main prize, then they would get a car majority of the prize pool. Otherwise the prize pool was essentially distribute among all the players. Yes technically if enough people played, they could have spent more than the prize pool, but, if enough people played, then the chance that one person won goes up as well.
- Piskvorrr 7y ago
  The ticket only has an expected positive value return under certain limited circumstances, not all the time (i.e. when jackpot has not been won for a time). State is not losing money in total - just moving around the distribution of prizes, but the sum total remains constant. If anyone would be losing money here, it would be a hypothetical winner of the jackpot - but as the jackpot is only redistributed when there is no such winner for some time...
- diminoten 7y ago
  No, because the payout for the state (the amount they planned on losing) was always the same. The amount was "lost" regardless, it just depended on if it went to one big winning ticket or hundreds/thousands of smaller winning tickets.
- eridius 7y ago
  For this to be true, every additional winning ticket purchased must result in a net loss to the state. But it doesn't, every additional winning ticket purchased is money going to the state. The losers in this case are the other people with winning tickets, because their payouts become smaller¹. ¹Well, given one assumption about how the game is run. The other assumption is that the 3- and 4-number winning tickets have a fixed payout calibrated such that this doesn't fully exhaust the pot, and in this case the "loser" for each additional winning ticket is whoever wins the full pot next time as the pot will be lower than it would otherwise have been.
  - zaroth 7y ago
    I think in this case the winnings were fixed and the surge in sales in Rolldown days would cause the pot to be drawn down much more, meaning a longer delay before the next Rolldown day. So Rolldowns probably became less frequent, but otherwise the lottery made their money and everyone took home exactly the winnings they would have in that particular game.
deleted 7y ago
[deleted]

M2Ys4U 7y ago

Are state lottery ticket purchases taxed? That'd also bring in a chunk of change.