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Couple wins millions using lottery loophole

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Re: Couple wins millions using lottery loophole

#51

Post by steventhedev »

thaumasiotes wrote: post #32
steventhedev wrote: post #31

Earlier quoted context omitted.

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?

whooops!

100mm with 99mm payout vs 10mm and 8.5mm payout then...

Re: Couple wins millions using lottery loophole

#52

Post by jarfil »

amelius wrote: post #26
Piskvorrr wrote: post #9

Earlier quoted context omitted.

From the article, it seems that it doesn't matter, they're random. (Or were random, apparently it's over now, doesn't matter.) To make up an example: Let's say that betting $1 in some way has a 4% chance of winning, and the payout is 20x bet, so if you win on one ticket, you get $20. So, you buy a lot of tickets (say 1000), and you pay $1000. Most of them don't win anything, but 4% of them win $20; $1000 x 4% x 20 =…

That requires a lot of faith in the fairness of the particular lottery.

Official lotteries are usually heavily regulated and audited to ensure they comply with their published rules. These are state lotteries we're talking here, not random gambling websites.

Re: Couple wins millions using lottery loophole

#53

Post by jarfil »

bsaul wrote: post #3
treydey wrote: post #2

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

Even weirder is the statement that the State that organized the lottery made more money thanks to them buying massive amount of tickets ( or maybe it was the publicity around the first newspaper article that triggered more interest, and so more participant in general ?)

That is correct: since these were not usual players who abstained from playing, but rather casual players who bought extra tickets just on rolldown, while the State got a cut from every ticket sale, they were effectively pouring extra money into the lottery, increasing the State's income.

Even if they re-invested their previous winnings, that would be twice (or more) that the State would get its cut from the same money, still increasing its income.

Re: Couple wins millions using lottery loophole

#54

Post by toyg »

zawerf wrote: post #39
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…

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 f…

From what I understand, money paid out was calculated after removing state profit from sales. So the state always profited, whether prizes were paid or not. It was effectively a per-ticket tax.

What changed was the distribution of winnings among players and operator. If everyone had cottoned on the “winning strategy”, the prize would have simply been divided in smaller and smaller parts - at some point, the winning strategy would have become a losing one - and the operator wouldn’t get to keep any “unclaimed prize”, only whatever fixed per-ticket fee they might have applied.

That’s precisely what the rules aimed for, btw. They wanted to unload prize money at higher rates over a certain threshold, for their own reasons - and they did. It just so happened that a small number of players benefited disproportionately more than others, because they played smart.

Imho the operators chickened out - as long as their profit model allowed for all prize money to be really given away, they could have continued, maximizing their overall revenue. However, if “keeping some of the prize money” was part of the expected operator profit, then yeah, it couldn’t be allowed to go on.

Re: Couple wins millions using lottery loophole

#55

Post by Piskvorrr »

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.

The ticket only has an expected positive value return under certain limited circumstances, not all the time (i.e. when jackpot has not been won for a time). State is not losing money in total - just moving around the distribution of prizes, but the sum total remains constant.

If anyone would be losing money here, it would be a hypothetical winner of the jackpot - but as the jackpot is only redistributed when there is no such winner for some time...

Re: Couple wins millions using lottery loophole

#56

Post by Piskvorrr »

zawerf wrote: post #39
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…

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 f…

Actually, the state doesn't seem to enter into the equation at all, that's a red herring. State gets (ticket_sales - prize_money), sure. This amount is predetermined by the rules (usually "X% goes to state, 100-X% goes to prize pool). From here, the only changes happen in the way that the prize pool is distributed to winners: part goes to jackpot, part goes to smaller prizes; if jackpot too large, recalculate with a larger part going to smaller prizes. The amount that state is paid out is never influenced by this.

Example:

In round 1, state sells tickets for 100 ($, $thousand, $billion, doesn't matter). 50% goes to state, 20% goes to jackpot, 30% goes to smaller prizes. State gets 50, jackpot is 20, prizes of 30 are paid out.

Round 2: sell 100, get 50, jackpot 20+20 (from last round), prizes of 30 are paid out.

Round 3: sell 100, get 50, jackpot 40+20, prizes of 30 are paid out.

Round 4: sell 100, get 50, jackpot 60+20, prizes of 30 are paid out.

Round 5: sell 100, get 50, jackpot 80+20=100, recalculation triggers, new jackpot 0, prizes of 30+100 are paid out.

Round 6: sell 100, get 50, jackpot 0+20, prizes of 30 are paid out.

Note that in every round, the amount that state receives is independent of the relationship between jackpot and other prizes.

Re: Couple wins millions using lottery loophole

#57

Post by JoeAltmaier »

Piskvorrr wrote: post #56
zawerf wrote: post #39

Earlier quoted context omitted.

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 f…

Actually, the state doesn't seem to enter into the equation at all, that's a red herring. State gets (ticket_sales - prize_money), sure. This amount is predetermined by the rules (usually "X% goes to state, 100-X% goes to prize pool). From here, the only changes happen in the way that the prize pool is distributed to winners: part goes to jackpot, part goes to smaller prizes; if jackpot too large, recalculate with a…

minus 5% for 'administration' which is outrageous. Its a fixed cost to administer the lottery. Should not be a percentage.

And is anybody calculating the taxes on the prize, which also goes to fed/state?

Re: Couple wins millions using lottery loophole

#58

Post by tantalor »

chrismcb wrote: post #45
tantalor wrote: post #43

Earlier quoted context omitted.

You are taking money from the prize pool, i.e. payouts for future winners.

You, and everyone else. That is the rule of the game. You aren't doing anything wrong. By that logic, any money winner is taking payours from future winners.

> You aren't doing anything wrong.

That's debatable. Lotteries are supposed to be completely up to chance. If by your own ingenuity you exploit a weakness then you are tipping the scales in your favor, which is unfair to less clever players.

It's basically the tragedy of the commons; everyone has the same chance of winning, but only you know you can safely risk more and win more, lessening the winning of others.

Re: Couple wins millions using lottery loophole

#60

Post by soneil »

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…

I think the irony is that from the organizer's point of view, it's essentially working as intended. The "windfall" mechanic was supposed to make rollovers more enticing by increasing the payout amounts for everyone. The only reason to make a lottery more enticing is to sell more tickets.

So they sold more tickets, and made more payouts on lesser tickets. Exactly as they planned. The lottery doesn't actually lose out - it's just emptying the pot (which was filled in previous games) in return for increased sales.

It's the old adage "the house never loses" - if 50% goes in the pot and 50% goes in their pockets, it doesn't matter who wins the pot - their 50% doesn't change. If a mechanic creates an incentive for more sales, their take increases. Fantastic. But if popular perception becomes that the game is rigged, less people buy tickets - and their take decreases.

(We had an office draw that'd run for months at a time, until someone eventually won. But we wouldn't take new players until the pot had been emptied, as someone joining for the last 2 rounds and winning everything, lost us more players than we gained. That is essentially the long-term risk here too. 10 people paying in until one of them wins, feels fair. 10 people paying in until the 11th wins, doesn't. And when the game stops feeling fair, you start to lose the feeders that fill the pot in the first place.)

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