If I only matched on 4 more numbers

[barbiek]

Ok you win that one. I look at it as most people will buy 10 bucks worth of tickets. Which is flawed.

Barbiek the odds are the same if the jackpot is 40M or 1.5B. Still the same amount of numbers to be chosen from. Still 1:292M

My bad your right! Wasn't looking at it correctly lol

 

[richmke]

Or, you can look at it from an Economists point of view regarding the utility value of $2 vs $40 million. The utility value of $2 is virtually $0. Whereas, the utility value of $40 million is huge. Even when adjusted for the expected value, the expected value of the utility value of $40 million is still more than the utility value of $2. Also, there is some entertainment value to the $2 wager, even if you loose. That adds to the utility value.

 

[sour_grapes]

Even when adjusted for the expected value, the expected value of the utility value of $40 million is still more than the utility value of $2.

I am skeptical that that is a true statement. That would imply that it would be a rational decision to play the lottery. Even though the expected payout is far, far less than 1. If this were the case, why would a rational person not play the lottery with all of his/her life's savings every week?

Also, there is some entertainment value to the $2 wager, even if you loose. That adds to the utility value.

As many have said, this is probably where the "payoff" occurs. And you get essentially the same entertainment value from one ticket as from plunking down thousands of dollars.

 

[richmke]

I am skeptical that that is a true statement. That would imply that it would be a rational decision to play the lottery.

As many have said, this is probably where the "payoff" occurs. And you get essentially the same entertainment value from one ticket as from plunking down thousands of dollars.

It all depends upon your Utility curve. Since part of the payoff is the "entertainment", if you derive no utility from gambling, then you keep the $2. Some people may not put enough "utility" on a $40 million payoff to offset the odds. If you are happy and set in your lifestyle, $40 million doesn't mean that much more (not much additional utility). So, you could care less.

The problem is: I have heard that low income people disproportionately play the lottery. For someone that makes $100,000/yr, the utility of $2 is the difference between buying a cup of coffee at Starbucks vs McDonalds. For a low income person, that $2 has a lot more utility (whether they have a decent lunch or not).

While the "entertainment" value might be higher for a low income person (dreaming of a much greater change in lifestyle), it is a very poor use of money for someone without much money.

Regarding plunking down thousands of dollars ... There is the law of diminishing returns. You may love the new StarWars movie. But, that doesn't mean you want to spend the entire weekend watching it over and over. The utility of $2 is one thing. The Utility of $2,000 to buy a thousand tickets is another. $2 means you skip Starbucks for a day, and exchange that for a dream. $2,000 means you might have to give up a trip to the Bahamas during Snowmageddon.

 

[sour_grapes]

I only contested the assertion that

Even when adjusted for the expected value, the expected value of the utility value of $40 million is still more than the utility value of $2.

I (like you originally did) excluded the utility value of the entertainment in assessing that particular statement.