At this level the expected value of a ticket it well over $2 (assuming 1 jackpot winner) and still above $1 if two people win. So would you consider purchasing tickets an 'investment'? Sure it is really high risk, but you have an expected return.
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It has a positive NPV, but that's not the complete analysis for individuals. Most people are risk averse. Having $1 for sure in my pocket, vs. having $350m* with a 1:176m probability doesn't always say "buy the ticket".
To put it more starkly, would you put your life's savings into buying tickets? The most likely outcome, that you lose, puts you in a very bad position (no Model S!!!), versus a very small likelihood of your suddenly being fairly wealthy. Most people would choose to remain financially secure, rather than bet it all on thin odds of becoming rich.
*The 359m cash option is taxable, so it's only about $215m after tax. You're buying tickets with after-tax dollars to win pre-tax dollars, so the expected after-tax value is only $1.23 currently.
*The 359m cash option is taxable, so it's only about $215m after tax. You're buying tickets with after-tax dollars to win pre-tax dollars, so the expected after-tax value is only $1.23 currently.
At 1.23X expected payout, wouldn't that make this a good investment for Warren Buffet (or anyone else that can easily afford to lose)?
Buying one ticket is understandable: One dollar is a minuscule amount of money unless you are destitute, and the dreams of wealth may distract you from real problems for a while. Buying two tickets makes absolutely no sense at all because the dreaming potential is unchanged, and your actual chances of winning are still as near zero as makes no difference.
...your chances of being struck by lightning are 1:280,000...
While I agree with what you say, I can imagine many people responding:
"Except with two tickets the chance of your dream coming true is twice as much!"
I know that statement doesn't make sense to me or you, but I'm sure it does make sense to all the people buying more than one ticket.
Bought $20 worth of tickets on the way to work today. One does have to figure that the jackpot will be split among multiple winners thus lowering your actual return - seems like big jackpots like this have multiple winners more often than not.With it probably being over a $400M cash payout by Fridays draw I wanted to point out that the expected value of a ticket (even after taxes) will probably be over the cost to buy one. Sure I am not dumping my Model S money to play the lotto. But it brings up a disconnect between real life and theory. I find it very interesting. And well I will probably play $20 bucks worth, and eat at home one extra night.