Elasticity of Demand and Optimal Prize Distribution for Instant Lottery Games

Atlantic Economic Journal, December 2016, Volume 44, Issue 4, pp 457–469

Posted: 21 Jun 2017

Date Written: November 10, 2016

Abstract

This study explores the optimal payout structure and prize distribution of instant (scratch-off) lottery games. Using ticket sales data for 185 instant lottery games sold between 2007 and 2011 by the Maryland State Lottery and Gaming Control Agency, we calculate the price elasticity of demand across a range of ticket denominations. Our findings suggest that increasing the payout rate of instant tickets will increase revenue, particularly among low denomination tickets. We also find that reallocating the current prize distributions within a game towards fewer, but more valuable, low-tier prizes will increase the number of tickets sold.

Keywords: Lotteries, Gambling, Elasticity of demand

JEL Classification: H270, D120, L830

Suggested Citation

Coon, Michael and Whieldon, Gwyneth, Elasticity of Demand and Optimal Prize Distribution for Instant Lottery Games (November 10, 2016). Atlantic Economic Journal, December 2016, Volume 44, Issue 4, pp 457–469, Available at SSRN: https://ssrn.com/abstract=2989729

Michael Coon (Contact Author)

University of Tampa ( email )

FL
United States

HOME PAGE: http://www.michael-coon.com

Gwyneth Whieldon

Hood College ( email )

401 Rosemont Ave
Frederick, MD 21701
United States

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