Statistics in the News: Chapter 8 The Theory
State Lotteries' New Strategy
Make no mistake about it: Lotteries run by various state
governments are big business. How to run them, however, can
be controversial. Recall Application 8.4 in the text which
notes how Connecticut's lotto chief lost his job when he didn't
want to lower the odds of winning that gamblers faced.
Recently state lottery commissions have been racing one
another in the nationwide gambling stampede. None wanted to
fall behind and see their residents' gambling dollars go after
out-of-state games. That's what clearly happened during the
summer 2001 Powerball game during which 600 million tickets
were sold. Attracted by a $295 million jackpot, New Yorkers
clogged the highways in search of a Powerball ticket in Connecticut.
And at the same time, you could buy tickets for the Big Game
in Massachusetts, promising a prize worth $90 million.
But the odds of winning were extremely small, and that was
deliberate. Lottery officials found that reducing the chance
of winning could actually boost ticket sales: The lower
the odds of winning, the more the jackpots go unclaimed and
roll over into bigger grand prizes. And a few big jackpots
sell many more tickets than weeks' worth of small jackpots.
Thus, taking a lesson from probability theory, Powerball
officials in 1997 applied the combination formula to
lower the odds of winning its jackpot from 1 in 55 million
to 1 in 80 million. Similarly in 1999, the Big Game narrowed
the chances of a big payoff from 1 in 53 million to 1 in 76
million. And sales accelerated!
Sources. Adapted from "Big Lotteries' Real Losers,"
The New York Times, August 29, 2001, p. A22, and http://www.masslottery.com.
© 2003 South-Western. All Rights Reserved. Disclaimer