Massachusetts Lottery Broken

wiredog sends in a story about how knowledge of lottery rules and statistics has allowed opportunistic players in Massachusetts to spend hundreds of thousands of dollars on tickets while being assured of a massive payoff. Quoting: "Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. During these brief periods — 'rolldown weeks' in gambling parlance — a tiny group of savvy bettors, among them highly trained computer scientists from MIT and Northeastern University, virtually take over the game. ... Srivastava calculated that a gambler who bought 200,000 Cash WinFall tickets during four rolldown weeks in a year would win enough to cover the $1.6 million investment and earn a profit of $240,000 to $1.4 million — without ever winning the jackpot."

Comments

Wait, what?

[Jeng]

I thought the lottery was for those who were bad at math?

Re:Wait, what?

[Thud457]

Apparently Massachusetts thought that meant people who are bad at math should be running the lottery. A critical mistake in the state that's home to Stanford.

Re:Wait, what?

[jacks0n]

That comment is about variance, not expected value. EV/ticket is the same whether you buy one ticket or one million tickets.

You all laughed when ....

[140Mandak262Jamuna]

Guys, you were all laughing when I bought the lottery tickets from Dogbert 50% off. He assured me that the odds of winning are just one one millionth less, but the price was 50%, count them full fifty percent off. You guys were taunting me for buying the previous day's tickets. Ha! Who is laughing now?

Oh I see

[JoshuaZ]

I see now. So as long as people have bad ideas about statistics it is ok. Believing some numbers are lucky is ok. Ignorant people saying things like "I haven't won and I've been playing for years, I have to win soon" is ok. Having people believe that God told them to buy a lottery ticket is ok. But when one someone actually has a chance to be correct about having a chance to win and make a profit then it isn't ok. Why don't the governments stop pretending. The lottery is intended on a tax for those who can't do math. And most of those people can't do math because the government schools failed to teach them. The government wants to use a lottery so it can get extra money from poor, uneducated people while pretending to have a progressive tax system which doesn't hurt the poor.

Re:Oh I see

[rubycodez]

that is false, plenty of people understand the math perfectly but play anyway. You don't understand the nature of three-quarters the people you meet (that's about the fraction of people who gamble at every place I've ever worked, and we're talking college educated people of median income of $85K currently)

Re:Oh I see

[MBGMorden]

Indeed. I've failed to see the "tax on the people who are bad at math" argument. Yes, the odds of winning are astronomically high. They are however, non-zero, and someone DOES eventually cash out on the jackpots. Deciding to take a gamble isn't stupid so long as you know and accept the odds.

If you go obsessive over it (ie, dumping loads of money into the lottery as a financial "plan"), then sure, but myself for example - my state has had the lottery for about 10 years now. In those 10 years, I've bought about 8 or so lottery tickets. So I'm spending less than a dollar per year on average. Still haven't won, and don't think I realistically ever will, but it's not too much of a financial burden to gamble away at a long shot (yes, a really, really LONG shot).

Basically, I go by the advice my dad taught me while playing cards - expect that you're going to lose every bet you ever make. If you're not ok with that outcome, then don't make the bet in the first place.

Same with progressive slot machines

[Anonymous Coward]

I used to code slot machines, hence staying anonymous. At some point, a different point for each bank of slots, the pay tables will reach over 100% payout if the jackpot is large enough. It was well known that by that point, professional gamblers and their buddies would squat on each machine tied to the progressive payout and play them until one of them hit the jackpot. The casinos didn't care, nor should they, because the overall pay table was still 95% or 90%. In other words they still made their money on the masses. But if you as an individual watch closely enough, in the short term you can make money.

Somewhat unrelated, there are also video poker machines that if played "perfectly" will earn you about $8 / hour statistically, although you may have to put in considerable hours before seeing the profit. Again it all depends on how the pay table is structured.

Bingo!

[Gription]

The point of the lottery is simply to make money for the state. There isn't any reason that it must be impossible to make money off of it unless that keeps the state from making money on it.

Re:That's what you get for exploiting your citizen

[i.r.id10t]

Thats what we did in Florida. All lottery funds are used for education.

Unfortunately they've cut *all* other funding sources for education... so sure since the late 80s the lottery has given over 10 billion to education... and the first few years were gravy... but now the lottery is the *only* funding source for education ...

not broken at all

[rubycodez]

"Broken" would mean the state was losing money. Your definition of "broken" needs fixed, you are jealous savvy people with enough money to invest can win at certain times

Re:Winnings taxable?

[Thelasko]

A small detail from the fine article notes that all of these players buy the tickets on behalf of a corporation which they wholly own. Corporations pay taxes based on profits. Simply put, revenue minus expenses. They are likely writing off the cost of the tickets as expenses.

That would be $280,000 revenue - $200,000 expenses - $80,000x35%=$52,000 for three days of work.