hey! i really enjoyed your work. is there a well-defined point at which the lottery might be considered to have a positive expected value, given the qualifying factors and caveats you point out? (obviously) the line for that is when the expected monetary value crosses the $0.00 threshold, but is there a particular dollar value that the winning numbers of a powerball draw would need to be at in order for it to have a positive expected value? thank you for writing your article! i look forward to your next one.
Thanks for the comment. I hesitate to say there's ever a well-defined universal point where it makes sense. Powerball and MegaMillions are way more likely to be sometimes be +EV if you would give most of it away. You could also make it more likely to +EV if you split a ticket with a giant syndicate so taxes per person were low- but the transaction costs then would be enormous and lower the EV.
For a simple example though we can look at MegaMillions. Assuming no tax implications on any of the prizes below $1M and donating 60% of the 1M prize and no state taxes, the EV of all non-jackpot prizes is about 23 cents. To get up to neutral EV with the jackpot you need it to be worth $1.77. So with no state taxes and donating as much as you can for tax breaks, that's a cash prize of about $630 million.
The real needed value is higher because of the risk of someone else winning too. And you can't predict that in amount because the number of other tickets sold isn't released till after the drawings- you can only project based on past data.
A rule of thumb might be something like when the value of the cash jackpot, minus taxes, multiplied by the odds of winning is $2 it's probably +EV or close to. The non-jackpot prizes can compensate for the risk of splitting the jackpot.
So $710m for the MM jackpot seems reasonable if you don't have to deal with state taxes. I haven't done it for the Powerball but would recommend the same rule of thumb. If you have to spend a lot of time getting the tickets or you dislike gambling, then it will probably never be +EV.
thanks for the detailed response. coming back to the topic of "gambling for a cause" a few weeks later, i have two other thoughts — [1] you might be interested in checking out sam anschell's article here (https://forum.effectivealtruism.org/posts/29EZBsbLovTgu6C3B/ea-fundraising-through-advantage-sports-betting-a-guide), and [2] i'd be interested to see if there are *other* forms of "gambling," like playing the lottery, which might have an +EV given the weird assumptions and results that optimizing for impact instead of profit lets you have.
hey! i really enjoyed your work. is there a well-defined point at which the lottery might be considered to have a positive expected value, given the qualifying factors and caveats you point out? (obviously) the line for that is when the expected monetary value crosses the $0.00 threshold, but is there a particular dollar value that the winning numbers of a powerball draw would need to be at in order for it to have a positive expected value? thank you for writing your article! i look forward to your next one.
Thanks for the comment. I hesitate to say there's ever a well-defined universal point where it makes sense. Powerball and MegaMillions are way more likely to be sometimes be +EV if you would give most of it away. You could also make it more likely to +EV if you split a ticket with a giant syndicate so taxes per person were low- but the transaction costs then would be enormous and lower the EV.
For a simple example though we can look at MegaMillions. Assuming no tax implications on any of the prizes below $1M and donating 60% of the 1M prize and no state taxes, the EV of all non-jackpot prizes is about 23 cents. To get up to neutral EV with the jackpot you need it to be worth $1.77. So with no state taxes and donating as much as you can for tax breaks, that's a cash prize of about $630 million.
The real needed value is higher because of the risk of someone else winning too. And you can't predict that in amount because the number of other tickets sold isn't released till after the drawings- you can only project based on past data.
A rule of thumb might be something like when the value of the cash jackpot, minus taxes, multiplied by the odds of winning is $2 it's probably +EV or close to. The non-jackpot prizes can compensate for the risk of splitting the jackpot.
So $710m for the MM jackpot seems reasonable if you don't have to deal with state taxes. I haven't done it for the Powerball but would recommend the same rule of thumb. If you have to spend a lot of time getting the tickets or you dislike gambling, then it will probably never be +EV.
thanks for the detailed response. coming back to the topic of "gambling for a cause" a few weeks later, i have two other thoughts — [1] you might be interested in checking out sam anschell's article here (https://forum.effectivealtruism.org/posts/29EZBsbLovTgu6C3B/ea-fundraising-through-advantage-sports-betting-a-guide), and [2] i'd be interested to see if there are *other* forms of "gambling," like playing the lottery, which might have an +EV given the weird assumptions and results that optimizing for impact instead of profit lets you have.