March 28, 2012 1:21 am at 1:21 am #602677
So I just bought my ticket, and I have two questions.
1. So the store guy told me that they get 3% of any winnings sold at their store.
Why would they do it like that? ????? me, I am entering into a transaction with negative Expected Value, so they give me a big bonus, such that the negative risk will account for the loss in value.
But, the store should be making normal business decisions when it decides to carry lottery tickets or not. Wouldn’t it be better to just give them 2.5% of all lottery sales?
2. Do you think the lottery could ever get high enough that you have a positive expected value? The chance of winning is 60x59x58x57x56x60= 39,322,886,400. Which means that if it got up to about 40 billion, you would actually have a positive EV (not accounting for the possibility of shared winnings.)
3. Now, a response to all those who make fun of lotteries and call it a tax on the stupid. Playing the lottery makes economic sense.
The reason for this is, the idea of risk. Risk is that in one outcome, money will be worth more to you than in the other outcome.
For example, we buy insurance against the risk of a fire in your house. The insurance companies make money, because they charge you more (on a present value basis) than they will pay you on average. Because, if your house burns down, money will be more valuable to you, because you will be out a house. So the money you are paying now is actually less valuable to you than the money you will get–even though you are paying more money.
To put this in numbers. Imagine your insurance premium is 100, and the expected losses are 98. But, if you lose your house, 98 will be worth more to you–it will be worth 101. So you are trading 100 for an expected value of 101.
The same is true here. If you win the lottery…
I’m not sure this makes sense. Because if you win, the money will be worth less. So not only are you trading 1 for an EV of .50, but the .50 you get will be worth less than that, because .50 is worth nothing when you have millions.
But it makes sense intuitively. So I’m stuck.March 28, 2012 1:27 am at 1:27 am #865034
For once I agree with youMarch 28, 2012 1:42 am at 1:42 am #865035
Your math is wrong. The odds for Mega Millios is 1/(C(56,5)*46) or 1:175,711,536 making a positive expected value (ignoring shared jackpots) a common occurance.March 28, 2012 1:44 am at 1:44 am #865036
I was thinking there are 60 numbers, and each of the first 5 balls are one of the 60, and then the mega ball is it’s own pool of 60. Making what I said.
Are those the wrong numbers?March 28, 2012 1:53 am at 1:53 am #865037
Your numbers are wrong but more importantly the order doesn’t matter so we’re dealing with combinations rather than permutations.
The first 5 balls are from a pool of 56 and the last is from a pool of 46.March 28, 2012 1:58 am at 1:58 am #865038
Oh. 56 and 46. And right, not in order.
Ok, so I can’t do math.
still, the more interesting part is the 3rd thing. If you can figure that out, I’ll dedicate you a troll thread.March 28, 2012 3:51 am at 3:51 am #865039
I didn’t win 🙁March 28, 2012 5:00 am at 5:00 am #865041sam4321Participant
PBA: To point number 3,I don’t think the lottery and insurance policies are comparable, two different things with two different models and variables.I understand why so many people call the lottery a tax on stupid people.I will say though if you don’t play you cant win. The bigger the risk the bigger the reward.March 28, 2012 5:13 am at 5:13 am #865042
I have feeling I won the jackpot ill check it now.March 28, 2012 5:17 am at 5:17 am #865043
I have feeling I won the jackpot ill check it now.
Nope, got two out of the five and one off the mega.
Almost a millionare.March 28, 2012 6:09 am at 6:09 am #865044
Regarding your third point lets take a hypothetical lottery where the chances for a $50,000,000 jackpot are 1:100,000,000. Most lottery players would treat the EV as $.50 (actualy most lottery players are too stupid to know what an EV is). However, if they actually had $50,000,000 it would be worth less to them so the EV really should be computed against what the perceived value of the jackpot would be if they actually had that much money. I’ll get back to you on how to calculate “perceived value” as one cannot just go to a billionaire and ask him how much $50,000,000 is worth.March 28, 2012 2:34 pm at 2:34 pm #865045
Nobody Wins jackpot up to $476 millions dollars i feel like so much less of a loser knowing nobody won the big prizeMarch 28, 2012 4:43 pm at 4:43 pm #865047midwesternerParticipant
You’re buying the right to actually dream until Friday night (till Motzoei Shabbos until you can find a way to check the numbers b’hetter).
Insurance policies work by one taking a small hefsed now (premiums) to prevent a big hefsed later. Lottery is taking a small hefsed now for a potential revach later. One is attempting to remain a muchzak in what you have. The other is an attempt at an increase.
Also the risk in insurance policies is based on actuarial tables to be realistic. One calculates what the aggregate risk in all of his potential customers and sets the rate at what is theortically a couple of points more than what he expects to pay out. Risks are calculated by the customers in a similar way (albeit without consulting actuaries) and they elect to buy the policies, or not. The odds of winning the lottery are off of any actuarial table. No one invests based on any EV having any realistic values. Your purchasing a dream, that’s it.March 28, 2012 5:52 pm at 5:52 pm #865048
My comparison to insurance was that when you buy insurance, you know it is a negative value investment for you. That is, the EV of the payout is less than the investment. But, you buy it anyway because you are risk averse, so that in your world, the payout has a higher value than the investment. Because if your house burns down, you will value those dollars much more than you do now.
I am trying to say that the same theory explains why you are willing to make a negative investment in the lottery ticket, and I am pretty sure I am correct, but I can’t figure it out.March 28, 2012 6:28 pm at 6:28 pm #865049
it’s up to 500 million (500,000,000)March 28, 2012 6:38 pm at 6:38 pm #865050yungerman1Participant
The Goq- Correct. Most people take the immediate payout which for a 500 million lottery is approximately 300 million. After taxes you are left with approximately 150 million.March 28, 2012 7:49 pm at 7:49 pm #865051
I promised i would buy everyone in the cr a keurig if i win im upping the ante gonna throw in 500 k cups too!March 28, 2012 7:54 pm at 7:54 pm #865052
I suppose the question I am asking, is whether we have “risk preference” towards the risk of winning a lottery.
I think we do. I’m just not sure how to quantify it. It doesn’t make much sense that dollars are worth more when you have a lot–we usually assume the opposite.March 28, 2012 8:19 pm at 8:19 pm #865053cshapiroMember
idk what ur talking about, but just hearing the word permutation gives me nightmares of college math…which surprisingly i got an a…it does help having a frum professors!!
oh and all u need is 1 ticket to win…March 28, 2012 8:36 pm at 8:36 pm #865054
I have a different question
if you won what would you take 19.2 million for 26 years, or 359 million lump sum
does anyone know how to figure it out with the TVM and inflation?March 29, 2012 1:29 am at 1:29 am #865055
Ok, so it turns out that I was correct and incorrect.
I was correct that my explanation didn’t make any sense, and I was incorrect because I thought it was possible to make sense of it, but it isn’t.
I spoke to a chashuv economist tonight. He said it makes no sense–there is no way to explain through risk theories why it makes sense to buy a lottery. The only explanation is that you are paying to dream.March 29, 2012 1:58 am at 1:58 am #865056oomisParticipant
If anyone wins, please let me know.March 29, 2012 4:07 am at 4:07 am #865057midwesternerParticipant
So Popa, it turns out that I was right! Thanx for getting me a haskama from the choshuve economist!!March 29, 2012 4:11 am at 4:11 am #865058LogicianParticipant
Here’s an idea i’ve heard:
G-d def. doesn’t trust me with 500 million. But he might trust me with five – so i’ll play the regular lotto.March 29, 2012 6:42 am at 6:42 am #865059
Oomis- I will let u know when I win. Sure.March 29, 2012 12:34 pm at 12:34 pm #865060squeakParticipant
Of course, oomis, because the first thing I’m going to do after I see that I have the winning numbers is log on to the cr. Probably to ask advice from the people here what to do with the money from a halachic and legal perspective. But now that you’ve asked, I will make an announcement here first.March 29, 2012 3:49 pm at 3:49 pm #865061charlie brownMember
when you win, please contact me. I know a Nigerian prince who can make you really really rich if you’ll invest a cool hundred million or so with him.March 29, 2012 4:34 pm at 4:34 pm #865062YW Moderator-42Moderator
charlie, I know a Nigerian Prince who can make you rich for only 50 million, your guy is a rip offMarch 29, 2012 4:35 pm at 4:35 pm #865063YW Moderator-42Moderator
How many more weeks of no winners do we need for the jackpot to exceed the national debt?March 29, 2012 7:17 pm at 7:17 pm #865064
personally I wouldn’t care about the national debt if I won, I would move straight away to Eretz YisraelMarch 29, 2012 7:36 pm at 7:36 pm #865065NaysbergMember
Why does anyone waste a buck on this?
How is Mega Millions different than PowerBall?March 29, 2012 7:59 pm at 7:59 pm #865066squeakParticipant
Charlie, yoi’ve got it backwards. If I win $500M the I am rich. It’s if I don’t win that I’ll need to help princes in Nigeria. But what you don’t know is that I am a Nigerian prince, and I am just waiting for one person to take my emails seriously…. I could really use help mocing my money to your country.March 30, 2012 5:37 pm at 5:37 pm #865067
Aaaaaaaaah! 640 MILLION!March 30, 2012 5:53 pm at 5:53 pm #865068
CA ill make you a deal if you win you give me one pct and if i win ill give you one pct deal????March 30, 2012 6:05 pm at 6:05 pm #865069iBump 2.0Participant
you have 9 times the chance of dying this year from a tv falling on your head then winning this jackpot.
just some food for thought 🙂
🙂 Bump 🙂March 30, 2012 6:08 pm at 6:08 pm #865071
Of the lump sum, or 640 million (take in mind the lump sum is also before taxes)March 30, 2012 6:20 pm at 6:20 pm #865072
The probability of any given ticket winning is 0.00000057%.
No winners: 5.1%
1 winner: 10.2
2 winners: 15.1
3 winners: 21.4
4 winners: 19.0
5 winners: 13.5
6 winners: 8.0
7 winners: 4.1
8 winners: 1.8March 30, 2012 7:01 pm at 7:01 pm #865073yaakov doeParticipant
I bought my tickets because I expect to get a better return on this inverment than I did with Bernie Madoff. At least I can’t lose as much.
I’ll have to wait till motzei Shabbos to verify than I won. Does anyone ou there want to claim it for me so that I can remain anonymous?March 30, 2012 7:19 pm at 7:19 pm #865074writersoulParticipant
My mom was in a gas station way out in yenemsvelt in New Jersey and she decided that she may as well buy a ticket.
Right behind her was a whole flock of yeshiva bochurim who pooled together and bought 60 TICKETS!!!March 30, 2012 9:49 pm at 9:49 pm #865076
Ah shood oif yiddishe gelt.March 30, 2012 10:00 pm at 10:00 pm #865077oomisParticipant
Thanks, you guys. And then I want to talk to you about that poperty in Florida that I am selling.March 31, 2012 8:09 pm at 8:09 pm #865078write or wrongParticipant
Everyone’s statistics are all wrong. The way I see it is, if Hashem wants me to win, I’ll win. And if Hashem wants me to lose, I’ll lose. So my odds of winning are 50-50!April 1, 2012 12:52 am at 12:52 am #865079
Did you win 250,000, one of the tix were sold in queens?April 1, 2012 1:21 am at 1:21 am #865080WolfishMusingsParticipant
So my odds of winning are 50-50!
Faulty reasoning. Just because there are two possibilities does not make the odds of each possibility 50%.
I will either be eaten by a bear tomorrow or not, but that doesn’t mean that my odds of being eaten are 50%.
The WolfApril 1, 2012 1:31 am at 1:31 am #865081
nope i didnt win sorry ca.April 1, 2012 2:21 am at 2:21 am #865082
Yes you did, you just don’t want to tell me bc then you would have to give me 2,500 😉April 1, 2012 2:21 am at 2:21 am #865083zahavasdadParticipant
One of the winning $250,000 tickets was sold on 14th Ave in Borough parkApril 1, 2012 2:44 am at 2:44 am #865084
“After they win the jackpot, most of them self-destruct and they end up much more unhappy than they were before,” Dr. Tom Manheim, who offers financial therapy in Solana Beach, Calif. “It’s really kind of a sad state of our economywhere we think that money, once again, is going to bring us happiness and it doesn’t.”April 1, 2012 2:53 pm at 2:53 pm #865085write or wrongParticipant
To the Wolf;
The bear example is not the same bc there are no wild bears roaming around the neighborhood, so the chances of being eaten by a bear are zero. But since we don’t know the will of Hashem, from our point of view, the chances are 50-50. From Hashem’s point of view, the chances are either 100% or zero, since He decides and knows who will win. Ultimately, it is Hashem who will determine who wins the lottery, and not “chance”. To go strictly by the “odds of winning” is leaving Hashem completely out of the pictureApril 1, 2012 8:08 pm at 8:08 pm #865086WolfishMusingsParticipant
write or wrong,
You’re still wrong, on two counts:
1. You don’t like bears? Fine. There are plenty of cats in my neighborhood.
I can either be clawed to death by a cat today or not. But that doesn’t make it a 50% chance. Just because there are two possibilities does not mean that the two possibilities have equal probabilities.
2. You’re correct that it’s HKBH who will determine who wins the lottery. But even so, if it were really 50%, then roughly half the people who play the lottery would win. Since they don’t, the chances are not 50-50.
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