We recently wrote about how some $8 billion in gift card value goes unredeemed in a given year, representing 10% of all gift card purchases. In the retail industry, this $8 billion gift is called “breakage.”
State lotteries, it turns out, also rake in a bit of breakage. Here’s a N.Y. Times article about winning lottery tickets that go unclaimed, citing examples of a $14 million prize in Illinois in 2005 and a $51.7 million prize in Indiana in 2002. I am guessing that the states claim far less breakage than the retail industry’s 10%, but this is still serious money — especially when you are already paying yourself a very, very healthy vigorish.
I cannot find any authoritative catalog of what percent of the pot each state keeps for itself from its lotteries, but over the years I’ve seen figures cited from 30% to 70%. Even at the low end, this would mean that our state governments rake a bigger vig than any horse track, casino, or bookie on earth.
Are people who play the lottery aware that perhaps 30% of their bet goes straight into the bookie’s pocket? I doubt it. It would be very interesting to post the vig of each state’s lottery on a web site where all players could check it out. (Does anyone know if such a site already exists? Here’s a site with links to every state lottery, but on the couple of state sites that I checked out, the vig wasn’t readily visible.) I wonder how fast the players would respond to the different rates — if neighboring states, e.g., kept 30% and 45% of the pot, respectively, would lottery players from the 45% state start flooding the 30% state until their own state lowered its vig?
Now that some state lotteries may soon be privatized, it will be interesting to see how the private firms set the vig. Will they keep it high, or even raise it, knowing that few people who play the lottery know or care? Will they make it lower in order to attract players from other states?
All lottery comments welcome.
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I thought it had been shown pretty conclusively that lottery buyers don’t respond to payout % as much as large jackpots. That’s why many lotteries make the odds worse, so that the jackpots will get bigger and encourage more casual players to buy “just one ticket” when they normally wouldn’t.
I thought it had been shown pretty conclusively that lottery buyers don’t respond to payout % as much as large jackpots. That’s why many lotteries make the odds worse, so that the jackpots will get bigger and encourage more casual players to buy “just one ticket” when they normally wouldn’t.
I’ll get you started (in most cases, the percentage is one minus the prize money percentage, since the rest is broken up between various administrative costs and public spending):
Overall ranking of lottery sales:
http://www.ohiolottery.com/profits/compare.html
CA: 50%
http://www.calottery.com/NR/rdonlyres/EC9535C5-817B-4051-9F5D-CF9A2A8C9532/0/LOTTERY_ACT_010107.pdf
MA: 31%
http://www.masslottery.com/about/faq.html
WA: 39%
http://www.walottery.com/docs/pdfs/06Brochure.pdf
NY: 44%
http://www.nylottery.org/ny/nyStore/cgi-bin/ProdSubEV_Cat_333653_SubCat_337630_NavRoot_305.htm
MN: 41%
http://www.house.leg.state.mn.us/hrd/issinfo/gamblott.htm#DOLL
MI: 46%
http://www.michigan.gov/lottery/0,1607,7-110-29196-4670–,00.html
I’ll get you started (in most cases, the percentage is one minus the prize money percentage, since the rest is broken up between various administrative costs and public spending):
Overall ranking of lottery sales:
http://www.ohiolottery.com/profits/compare.html
CA: 50%
http://www.calottery.com/NR/rdonlyres/EC9535C5-817B-4051-9F5D-CF9A2A8C9532/0/LOTTERY_ACT_010107.pdf
MA: 31%
http://www.masslottery.com/about/faq.html
WA: 39%
http://www.walottery.com/docs/pdfs/06Brochure.pdf
NY: 44%
http://www.nylottery.org/ny/nyStore/cgi-bin/ProdSubEV_Cat_333653_SubCat_337630_NavRoot_305.htm
MN: 41%
http://www.house.leg.state.mn.us/hrd/issinfo/gamblott.htm#DOLL
MI: 46%
http://www.michigan.gov/lottery/0,1607,7-110-29196-4670–,00.html
Texas is working on privatizing the lottery. Just another wonderful thing our Gov. Rick Perry is doing in addition to forcing toll roads, owned and managed by companies based in Europe, down our throats.
In Texas, the lottery was established to fund education. Not only is that not happening, I don’t see how privatization of a state lottery would provide the state with any type of monetary benefit and instead potentially increase the need for higher taxes to offset the money that was previously coming into the state.
Texas is working on privatizing the lottery. Just another wonderful thing our Gov. Rick Perry is doing in addition to forcing toll roads, owned and managed by companies based in Europe, down our throats.
In Texas, the lottery was established to fund education. Not only is that not happening, I don’t see how privatization of a state lottery would provide the state with any type of monetary benefit and instead potentially increase the need for higher taxes to offset the money that was previously coming into the state.
I don’t see how they could effectively compete on percentage vigorish. To do this, they would need to advertise, and “we only keep 25% of your money” would turn off far more people than it would attract.
I don’t see how they could effectively compete on percentage vigorish. To do this, they would need to advertise, and “we only keep 25% of your money” would turn off far more people than it would attract.