On Powerball and Mega Millions
November 29, 2012 Leave a comment
We wrote a lesson in CME Precalculus about lotteries, and used both large multi-state lotteries (Powerball and Mega Millions) as examples — without using their brand names, which would be illegal.
Most of the questions are about how pathetically bad the return-on-investment is for a ticket: try it sometime, it’s amazingly bad when the jackpot value is low. But eventually the jackpot value grows high enough to make the lottery favorable to the player, right? Eventually?
This analysis by Jeremy Elson suggests the answer is no, and that when the jackpot is large enough, the mass hysteria of ticket-buying drives the jackpot value down. When multiple players hit the winning combination, they split the prize, rather than each earning the prize.
And, sure enough, the “$580 million” jackpot was split two ways, with each unfortunate winner only taking a pre-tax cash lump sum of about $175 million. Only $175 million, what a ripoff!