The Demand for EuroMillions Lottery Tickets

 The Demand for EuroMillions Lottery Tickets

1EuroMillions is a lottery which was started in Spain, France, the United Kingdom. The pool was expanded to include six additional countries in October 2004: Belgium (Belgium), Ireland, Luxembourg, Portugal and Switzerland. This lottery offers a very low chance of winning, only one in 76 millions. [1]

2Offering one game on the European level allows for more players and avoids players feeling jackpot fatigue, especially in smaller countries (Matheson und Grote 2004). When it seems impossible to win the Jackpot, players abandon the game. This increases the chance that there won't be a winner in next draw, and ultimately puts the survival the game at risk.

3On one hand, a low chance of winning results in rollovers. That is, you can carry forward jackpots that were not won from one drawing. Two conflicting effects result from rollovers. One, the game becomes more attractive if the jackpot rises, but on the other, the likelihood of sharing the winnings also increases, which decreases their value.

The effective price method has been used to predict the demand for lottery tickets. The difference between the price of the ticket and its expected worth is called the effective price. [2]

[2]

Farrell and Clotfelter (1993), Cook et al. (1999), Forrest, et al. The first reason is rollovers. These increase the expected price but decrease the effective value. The second, though not independent from the first, is the fact the effective price is dependent on the number sold. This influence the probability of rollover. These two factors need to be considered when estimating. These comments show that EuroMillions tickets demand function estimation is of special interest due to low chances of winning and numerous rollovers. [3]

[3]

The jackpot winner was not found between...

5The international nature and draw of the lottery is what makes this article interesting. It is played in nine countries, with the same rules and draws. There is no comparable study to our knowledge. International comparisons of lotteries deal with games that are different across countries (Garrett, 2001). We will examine two preferences hypotheses and analyze ticket demand at both the European and country levels. The first assumes that preferences are linear in relation to probabilities. This is the most commonly used hypothesis in literature. It is also associated with the effective pricing method. The expected profitability of this game is therefore largely negative, so it doesn't allow the participation to be justified. The second preference hypothesis assumes that objective probabilities have been distorted to the extent that the perceived likelihood of winning the jackpot is greatly overestimated. This alternative is compatible with the hypothesis that there are transformations of probabilities. It can be found in Prospect Theory (Kahneman, Tversky 1979; Tversky, Kahneman 1992) and in the rank-dependent expected utility (Quiggin 1982). It allows both the demand to become estimated and the justification for participation in a unfavorable lottery.

[4]

Convex was introduced to solve this problem in the first attempts. This is a departure from the classic model.

6One can observe that some authors attribute a use value to the very act of playing. For example, they interpret participation in a lottery or EuroMillions game as the purchase a "right-to-dream" (Conlisk and Forrest 1993). 2002; Quiggin 1991). Kearney (2005) analyzed the effect of substitution between lotteries, other consumer goods, and found that lotteries spending did not replace spending on other games, but rather for spending on other consumer products. The distortion of probabilities or buying a dream are both possible hypotheses. However, they all involve the over-weighting and valuing of the lottery jackpot. We also use the Forrest et.al. model to estimate the demand functions. This means that we replace the effective price with the expected jackpot level. (2002). This approach, however, does not increase the quality of the match which is very good under the standard approach. The player may have a slightly different behaviour, as there is a price-demand relation. However, the bigger the product (the jackpot amount), the more willing the player to pay.

7In this article we show that there are significant behavioral differences across countries. We find that UK players are particularly sensitive to variations in the jackpot. This is due to a decrease or perception in the effective price depending on the probability of winning. Forrest et. al. recently found that players are more sensitive to the very competitive environment in the United Kingdom. (2008). These variations are more sensitive to Spanish and Portuguese players, however. Many explanations are possible. One explanation could be differences in GDP per head. Lotteries are sometimes referred to as regressive taxation because they hit the most vulnerable income brackets (Oster 2004,).

8Syndicated gaming is a Spanish culture where players play in groups. This leads to lower sensitivity because of the transaction-related costs between the members of the group. Finally, you should know that all winnings of lotteries except EuroMillions are taxed in Portugal.

[5]

An anonymous referee drew our... which could explain the high level of participation as well as the lower sensitivity of variations of the jackpot.

9On the European scale, we get a long-run price elasticity equal to -1.9. This is consistent in most of the literature results. Farrell et al. (1999), a elasticity of 1.05 was obtained for the United Kingdom by Forrest et. al. Forrest and McHale (2007) have the most up-to-date data at -0.91. Gulley, Scott (1993), who studied American lotteries, obtained elasticities equal or greater than -1.15 for Massachusetts, Kentucky, and Ohio. However, there are significant differences among countries that participate in lotteries. The elasticities for both Spain and the United Kingdom vary by -0.49 to -1.76.

10Farrell et al. 1999) used the coefficient of delayed sales in the demand equation to measure the addictiveness of the lottery. The coefficient for the United Kingdom lottery was 0.33 between November 1994 & February 1997. Again, EuroMillions results can vary greatly from one country to the next. The estimated coefficients for Spain and Ireland range from 0.2 to 0.67.

11The following organization is used for the article. Section 2 presents the EuroMillions rules, and Section 3 contains the empirical data. Section 3 focuses on two models to estimate demand, according the hypothesis for preferences. Section 4 contains the European empirical results. Section 5 presents country-by country details. The last section presents conclusions and suggests directions for further research. The Best Online Lottery Syndicate in 106 Selections