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Couple wins millions using lottery loophole

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Re: Couple wins millions using lottery loophole

#31

Post by steventhedev »

pliny wrote: post #15
thaumasiotes wrote: post #12

Earlier quoted context omitted.

The state makes money from every ticket purchased. The lottery simply pays out a fixed percentage of ticket revenue. More ticket sales means more money to the state, regardless of whether those tickets, when purchased, had an expected positive or negative return.

If the ticket has an expected positive return for the buyer, then the state must be losing money.

For that particular round of the game, yes.

Overall? No, unless the game is very badly designed.

The whole situation arises from rolling over the losses between rounds, which "sweetens" the pot for intelligent players. It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts of 8mm).

Re: Couple wins millions using lottery loophole

#32

Post by thaumasiotes »

steventhedev wrote: post #31
pliny wrote: post #15

Earlier quoted context omitted.

If the ticket has an expected positive return for the buyer, then the state must be losing money.

For that particular round of the game, yes. Overall? No, unless the game is very badly designed. The whole situation arises from rolling over the losses between rounds, which "sweetens" the pot for intelligent players. It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts…

> It's also a good way to inflate your numbers if you know that your game might get cut next year (e.g. it might be better to show turnover of 100mm and payouts of 90mm than turnover of 10mm and payouts of 8mm).

...wouldn't that be better under all possible circumstances? Would you rather have $10 million or $2 million?

Re: Couple wins millions using lottery loophole

#33

Post by pliny »

thaumasiotes wrote: post #29
zawerf wrote: post #24

Earlier quoted context omitted.

I feel like mathematically, you must be right. One of the sides must be calculating their expected value wrong. For example I can offer to pay a $3 jackpot (split across winners) for a $1 game for guessing heads or tails. If more than 3 people play the game, I make money. For each player, the naive way to calculate expected return is $3 * 0.5 + $0 * 0.5 - $1 = $0.5. So the players also think they are making money. Bu…

> mathematically, you must be right. One of the sides must be calculating their expected value wrong. He isn't right. The state doesn't work with expected values in any way. Money comes in via ticket sales, some of it goes into the state budget, the rest goes out as lottery payouts. There is no element of chance in any of that. As you point out here and I point out elsewhere, the expected value of a ticket for the pu…

The way the game is presented in the article is that the low payout numbers are fixed (so a 3 match on a given rolldown game pays out $50 regardless of how many winners there are). This is consistent with the state lotteries I know. In this scenario every ticket sold causes the state to lose money, on average.

Re: Couple wins millions using lottery loophole

#34

Post by caf »

Slartie wrote: post #25

When I read this kind of stories about US lotteries (and there seem to be several of this kind of stories going around), I always wonder how on earth it is possible for so many cases of failed lottery rule design to exist in the first place, and for those clear failures to persist for so long. Did no one notice that the lottery always lost huge sums of money during the Rolldown draws, while it gained money on normal…

Long before that point, lotteries that decide to innovate in game design don't have a professional actuary on the staff to run the ruler over the designs?

Re: Couple wins millions using lottery loophole

#36

Post by chrismcb »

pliny wrote: post #33
thaumasiotes wrote: post #29

Earlier quoted context omitted.

> mathematically, you must be right. One of the sides must be calculating their expected value wrong. He isn't right. The state doesn't work with expected values in any way. Money comes in via ticket sales, some of it goes into the state budget, the rest goes out as lottery payouts. There is no element of chance in any of that. As you point out here and I point out elsewhere, the expected value of a ticket for the pu…

The way the game is presented in the article is that the low payout numbers are fixed (so a 3 match on a given rolldown game pays out $50 regardless of how many winners there are). This is consistent with the state lotteries I know. In this scenario every ticket sold causes the state to lose money, on average.

No. Every ticket sold causes the prize pool to lose money. The amount the state makes increases.

Re: Couple wins millions using lottery loophole

#37

Post by chrismcb »

emerongi wrote: post #8
treydey wrote: post #2

Can anyone explain the strategy like I'm 5? I'm confused by his answer.

The jackpot grows off of people losing money. Once people have lost enough money ($5M), the chances of winning the money with a single ticket are raised, however you can no longer win the whole $5M with a single ticket - the money is now distributed over a larger pool of tickets. After that it becomes a good bet, because you can bet smaller amounts, but still win more than you put in initially - you're profiting off…

Someone can always win the whole 5M. It is just that if the prize for large enough and no one win, then the amount of the small prizes increased. It was a way to keep the total payout low.

Re: Couple wins millions using lottery loophole

#38

Post by chrismcb »

MeteorMarc wrote: post #18

I just wonder, do you have to think very high about yourself to play such a game and enjoy it? Or very low? I just can not imagine myself feeling good about this. Of course, the feeling dumbs a bit: compare the feelings you had after using your first illegally copied floppy disk or mp3 track and the later ones, but still.

Why would you feel bad? What woukd you have down that was wrong? You aren't taking money from anyone else.

Re: Couple wins millions using lottery loophole

#39

Post by zawerf »

thaumasiotes wrote: post #29
zawerf wrote: post #24

Earlier quoted context omitted.

I feel like mathematically, you must be right. One of the sides must be calculating their expected value wrong. For example I can offer to pay a $3 jackpot (split across winners) for a $1 game for guessing heads or tails. If more than 3 people play the game, I make money. For each player, the naive way to calculate expected return is $3 * 0.5 + $0 * 0.5 - $1 = $0.5. So the players also think they are making money. Bu…

> mathematically, you must be right. One of the sides must be calculating their expected value wrong. He isn't right. The state doesn't work with expected values in any way. Money comes in via ticket sales, some of it goes into the state budget, the rest goes out as lottery payouts. There is no element of chance in any of that. As you point out here and I point out elsewhere, the expected value of a ticket for the pu…

It's a zero sum game. If one side is positive, the other side must be negative.

If jackpot isn't paid out, state gets (ticket_sales), players in total gets (-ticket_sales).

If jackpot is paid out, state gets (ticket_sales - jackpot), players gets (jackpot - ticket_sales). The winning players get ((jackpot - winning_ticket_sales) / num_winners) each, the rest gets (losing_ticket_sales).

Either way the expected value for an individual player is always the opposite sign of the expected value of the state.

The interpretation that people might be using is that: when the tickets sold is low, it's positive expected value for the players. When sales cross the jackpot, it's positive expected value for the state. But then it becomes negative value for the player! There's no point in time where both sides are winning.

(And of course that interpretation is pretty meaningless because you don't want to calculate the expected return based on the current number of tickets sold. You want the forecast of the eventual number of tickets sold. The state never really loses, even at the start because they have a pretty good idea of what this number will be in the end)

Re: Couple wins millions using lottery loophole

#40

Post by ilamont »

Slartie wrote: post #25

When I read this kind of stories about US lotteries (and there seem to be several of this kind of stories going around), I always wonder how on earth it is possible for so many cases of failed lottery rule design to exist in the first place, and for those clear failures to persist for so long. Did no one notice that the lottery always lost huge sums of money during the Rolldown draws, while it gained money on normal…

These lotteries are usually run by state commissions, staffed by career bureaucrats and sometimes led by appointees. I don't think there's a deep well of talent that is familiar with how to implement robust monitoring, security, and optimization systems.
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