The lottery. The odds.

[Stu Pidasso]

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Please elaborate.

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Its not EV at 150 million. There are a couple of things people forget when trying to determine when a lottery becomes +EV.

1)The lump sum value is considerably less than the stated Jackpot value.

2)There is a chop factor. Since it is possible for more than one winning ticket to be sold, you are not guaranteed the whole jackpot when you pick all the winning numbers(This is why organizations who try to buy every possible combination when the Jackpot gets to be a certain value end up going bust).

3)You probably do not get to write off your losing lotto tickets, but will have to pay taxes on your wins.

That being said, I still spend a few bucks on the lotto when it gets huge. The money I spend is such a low amount that it doesn't have much ultility to me while the money I can win will have a lot of ultility to me. In a sense the lotto could be -EV moneywise but +EV ultilitywise.

Stu

[jason_t]

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He claimed that the prize had gotten so big that betting $1 to win that overinflated pot was actually +EV. We did a little research b/c we were bored and it seemed to check out.

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Other poster: [ QUOTE ]

Powerball becomes +EV when the jackpot is around $150,000,000.

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Please elaborate.

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I don't remember the exact numbers the powerball uses, but I think it's 6 balls and the balls are numbered up to let's say 50 to make the math easy. That means that you have a 1/50 shot on each ball, or to use poker terms "street."

I think the math would go like this:

(1/50)^6= .000000000064
---This is your chance of winning given my parameters.

With that number, I think you can conclude that the powerball jackpot would have to be like 1.64 billion to make it worth it. But like I said, I'm not sure about the exact parameters of the powerball.

Oh, and it's possible that I am way out of line here. [img]/images/graemlins/crazy.gif[/img]

Edit: I just read that the non-powerball balls can be in any order, I think that make a big difference, but I don't know how to express it in math, as I am mathematically challenged. I knew the number I came up with had to be wayyyy too high.

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There are 53 regular balls and 42 powerballs.

The number of ways to choose 5 distinct numbers from 53 where order doesn't matter is

53 * 52 * 51 * 50 * 49 / 5 * 4 * 3 * 2 * 1.

Multiply this by 42 for the powerball choices and the number of options in playing powerball for match 5+ powerball is

53 * 52 * 51 * 50 * 49 * 42 / 5 * 4 * 3 * 2 * 1 = 120 526 770.

Thus the odds of winning are 120526769:1.

This doesn't mean it's +EV at $120526769. The pool is split and there are taxes.

[squeek12]

I knew I should have just left this to all the damn math whizzes out there [img]/images/graemlins/blush.gif[/img]

[Ulysses]

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He claimed that the prize had gotten so big that betting $1 to win that overinflated pot was actually +EV. We did a little research b/c we were bored and it seemed to check out.

[/ QUOTE ]

Other poster: [ QUOTE ]

Powerball becomes +EV when the jackpot is around $150,000,000.

[/ QUOTE ]

Please elaborate.

[/ QUOTE ]

I don't remember the exact numbers the powerball uses, but I think it's 6 balls and the balls are numbered up to let's say 50 to make the math easy. That means that you have a 1/50 shot on each ball, or to use poker terms "street."

I think the math would go like this:

(1/50)^6= .000000000064
---This is your chance of winning given my parameters.

With that number, I think you can conclude that the powerball jackpot would have to be like 1.64 billion to make it worth it. But like I said, I'm not sure about the exact parameters of the powerball.

Oh, and it's possible that I am way out of line here. [img]/images/graemlins/crazy.gif[/img]

Edit: I just read that the non-powerball balls can be in any order, I think that make a big difference, but I don't know how to express it in math, as I am mathematically challenged. I knew the number I came up with had to be wayyyy too high.

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You know that more than one person can pick the same numbers, right?

[squeek12]

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You know that more than one person can win, right?

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Yea, Jason_t did the math correctly as far as odds of hitting the jackpot, but he didn't go into detail about how the possibility of splitting it would affect the point at which it becomes +EV. This math is making me throw up in my mouth a little, gotta stop now.

[teamdonkey]

there's also money payed out to non-jackpot winners. Grab one of the pamphlets, it has the odds of winning for each prize spelled out pretty clearly. Without figuring in taxes and lump sum penalties, it becomes +EV at a little over 100 million assuming you don't split (i had the numbers figured out at one point, but don't have them in front of me).

I think however that the value of that money goes down as the prize gets higher. Winning 5 million dollars radically changes your life. If you won 5 million more after that, it would be great, but not life changing... the second 5 million is worth less to you than the first.

So i'm not sure EV calculations are a great way to go with a huge jackpot like the powerball, unless you're part of a group that would split any winnings.

edit: powerball has absolutely been +EV a few times. Even with taxes penalties and chances of splitting, when it gets well over 200 million there's really no question.

[jason_t]

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there's also money payed out to non-jackpot winners.

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This doesn't mean it's +EV at $120526769. The pool is split and there are taxes.

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[Ulysses]

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edit: powerball has absolutely been +EV a few times. Even with taxes penalties and chances of splitting, when it gets well over 200 million there's really no question.

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Please elaborate.

[captZEEbo1]

Isn't the lottery the same concept of having insurance on things? Like, it's a -EV investment to pay for collision insurance, but if you hit the "jackpot" and get into a wreck, you'll be glad you did.

[teamdonkey]

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edit: powerball has absolutely been +EV a few times. Even with taxes penalties and chances of splitting, when it gets well over 200 million there's really no question.

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Please elaborate.

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from www.powerball.com, the various non-jackpot prizes pay back 17 cents on the dollar. The chances of winning the jackpot are 1:120,256,770. To get the remaining 83 cents on your dollar, a jackpot win would have to be worth $100,037,219. That part is simple. What isn't as simple is figuring out what the actual jackpot is for your payout to average that figure.

If taxes are 30% (i have no idea), and on average you'll split 20% of the prize pool with other winners (a number from the website), the jackpot would have to be $178,637,891 to break even.

This ignores any lump sum penalties (i don't know what they are). It seems reasonable to me that as the total jackpot approaches $250 million this penalty (if lump sum is what you choose, im unsure about how the payment options work) is overcome.