Does It Pay to Buy the Pot in the Canadian 6/49 Lottery? Implications for Lottery Design

Abstract

The Canadian 6/49 Lotto, despite its unusual payout structure, is one of the few government sponsored lotteries that has the potential for a favorable strategy we call "buying the pot." By "buying the pot" we mean that a syndicate buys one of each ticket in the lottery, ensuring that it holds a jackpot winner. We assume that the other bettors independently buy small numbers of tickets. This paper presents (1) a formula for the syndicate's expected return, (2) conditions under which buying the pot produces a significant positive expected return, and (3) the implications of these findings for lottery design.

Keywords: Lottery, Lottery Design, Gambling, Market Efficiency

JEL Classification: G14, D47, G12