(Untitled)

[ts4z]

MegaMillions is at $476M, or something like $330 "cash".

At what point is it +EV to play a progressive lottery?  Or this progressive lottery?  I can work out the odds, and have, but I don't know how to take into account the chance of someone else winning -- much less taxes.

Comments

[dmorr]

Math is hard. Instead, consider two things: first, the difference between 100 million and 300 million is pretty small, money is highly nonlinear once you get to those levels. That argues against buying tickets.

Second, you may get some value (entertainment?) out of buying a ticket just to participate, in which case it doesn't matter if you win a few cents or lose a few cents on average. This argues for buying tickets.

Did that help? :P

[ext_1460]

I honestly don't know if the difference between 100mil and 300mil is small, once you have at least 100mil. When I was 20, I'd have said the difference between a quarter mil and half a mil was negligible, but it turns out I care quite a bit about that increment now.

I do agree that the expected entertainment value is likely to be much larger than the expected monetary value. Speaking for myself, the entertainment value is higher when it's closer to +EV monetarily, so that argues for buying a ticket or two.

There remains a question of when it becomes so clearly +EV monetarily after taxes and overhead that you should put significant money into it, perhaps creating or finding a pool of players.

[dmorr]

I do know people in the 100-300M range, and while they'd say they want to be in the top of that range, the reason is mostly because of comparison to one another, in my view, rather than anything about the money itself. So you're better off with $100M hanging out with people who have 50, than 200 hanging out with people who have 500.

My feeling is that the price is right for this one to go big if you can afford the variance, which almost nobody can. Unfortunately the logistics of buying a huge number of tickets ensuring good number coverage are really really challenging.

[ts4z]

It seems like there ought to be another statement at the other end of the Kelly criterion, where it's no big deal to go make a silly bet that's +EV because of low marginal utility of $1, or $10, or $100, or even $1000.

I doubt that it's possible to get good coverage on every number. Someone did that, back before the "mega" balls, back in the '80s and failed to actually get about 10% of the tickets -- then got lucky and won it anyway.

[adbploink]

+ev or not, the variance is a killer.

Buy a ticket if the utility value of a buck is less than the "entertainment" of potentially winning.

[ts4z]

But I feel dirty if I make -EV bets.

[adb_jaeger]

So you shower after hitting the cardroom?

(rimshot!)

[ts4z]

Cardroom, no. Playing at BARGE, yes.

[njchick]

I bought $20 worth of tickets for Friday's drawing this morning.

Found this article amusing about the growing Mega Millions jackpot from last week.

http://blogs.reuters.com/felix-salmon/2012/03/20/why-im-playing-the-lottery/

[tom_bayes]

The coefficient of variation (i.e. ratio of standard deviation to EV) is monstrous. A colleague and I actually played around with taking stuff like multiple winners into consideration. It's messy and is fairly neglible. Empirical data from past PowerBall drawings (very similar to MegaMillions) shows that there will occasionally be 2-4 winners that chop the pot, but don't worry too much about getting quartered.

Just don't buy a combination of numbers that falls into an obvious pattern like 1-2-3-4-5-6 or 7-14-21-28-35-42. Someone did a study and found that patterns like these get bought by thousands of players. I actually hope one of these combinations hits the jackpot someday and the jackpot gets chopped like 20,000 ways.

[gunga_galunga]

That's also why choosing numbers >31 and especially >12 reduces your chopping chances. People love to do birthdays and anniversaries as their seed data. My grandmother used buy two tickets, one with my, my sister's, and my mother's birthdays (month & day) making up the six numbers, and one that was my aunt's and two cousins' birthdays. I believe this is fairly common.