darn - didn't win the Powerball......

[durango dude]

Subject says it all.

When the jackpot hits a certain level - it's statistically rational to buy a ticket.

The jackpot hit the statistically rational level this week - and I participated in the madness.

It's fun to dream - what would happen if..........

I could pay my kids' tuition....... I'd be able to help the community's struggling Christian school. I could go to the woodworking school I've thought about for a couple of years.

Maybe I'd upgrade my BT to a unisaw! If I'm going to have a Unisaw - I'll need a home with a real shop!

There was a 99.9999 percent chance the dreams would end. That's just what happened 9:00 PM (Mountain).

I don't at all regret the moments of vanity - it was fun imagining being good enough - even for a few moments.

[LCHIEN]

You and about 150 million other ticket holders.
They were saying shortly before the lottery drawing that 80% of the number combinations had been sold, almost assuring that the lottery would be won this time.

You say it becomes statistically rational to buy a ticket. It does, except for the fact that at some point the likelyhood of sharing the jackpots starts to grow and then it works against you.

Still, like you , I bought a few. Not likely to win but you can't win if you don't buy one. Its entertaining for a few minutes while you dream.

[TB Roye]

I only got one number. Glad I only spent $10 Don't know if anybody won yet.

Tom

[LCHIEN]

news said there were two winning tickets sold. Didn't say which of 43 states they were in.

AP News (2AM CT, Sunday) now says there was only one winning ticket, and it was in Florida. Only came up 590 million jackpot.

[vaking]

When you say that jackpot is rational at specific level - do you factor in effects of taxes and time?
I think all the models that calculate when it becomes rational to buy lottery tickets conveniently neglect to take into consideration taxes and time. With these considerations the rational jackpot level is probably 3-4 times higher than without.
The cost of ticket is not tax deductible. If you win - your winnings are taxable at a very high rate. I believe about 50% of your winnings will go towards taxes.
Also if you win - you will not get a lump sum. Winnings will be divided and paid out to you over 20 year span. During those 20 years government will be using your money but will not be paying any interest to you. Meanwhile inflation will be eating into your money. Most people consider that winning lottery is a god's gift and don't bother with taxes but if you are talking about rational - you really imply that statistical mean of a win exceeds the cost of ticket. Taxes and time reduce the value of statistical mean several times - very relevant factor.

[LCHIEN]

Alex, actually the costs of tickets are tax deductable if you have winnings to deduct them from. So most people don't have winnings and don't deduct them, but those who win win so big its not worth deducting.
And the tax rate is not 50%, its like 30% max on personal income.

The cash value option takes out the 20 year thing, but the cash value option pays only about $350 million as opposed to the annuitized 600 million figure.

So assuming you only costs for a winning ticket is $2 then the rate of return before taxes is 175 million to one, same as the odds of winning.

So yes that the bare bones rational point that DD was alluding to. By the time you factor in taxes and the gas it took to go and buy the ticket and the time, its not worth it we really need more than a $600 million powerball jackpot.

There's no rational reason at all for someone to buy into the new jackpot... a $2 ticket will win you $25 million cash value for the 175 million to one chance.

I actually agree with the critics who say that lotteries are a regressive tax on the poor - who can least afford it. Thats a social issue and not a political one at this point so i'd better stop right here.

[cabinetman]

news said there were two winning tickets sold. Didn't say which of 43 states they were in.

AP News (2AM CT, Sunday) now says there was only one winning ticket, and it was in Florida. Only came up 590 million jackpot.

A Floridian won? Maybe it's me.

.

[cabinetman]

I can't check the numbers yet, as the wife has stashed the ticket somewhere, and she is sleeping.

.

[cabinetman]

If I'm the winner, here's what I'll do. I'll give $100 to all active members that are posting to this forum. So, if you aren't doing that...get with it.

.

[woodturner]

When the jackpot hits a certain level - it's statistically rational to buy a ticket.

Umm, I don't think statistics works that way - there is no jackpot level where buying a lottery ticket becomes "rational".
http://dilbert.com/strips/comic/1994-04-08/

[Richard in Smithville]

Here in the Great White North, lottery winnings are smaller but then again they are non taxable. Any interest however is considered as income and therefore taxed.

There was one drawing where the winning numbers was a consecutive run of seven numbers. This resulted in so many winning tickets, and first place being split so many ways, that the second place winner received more money than the first place winners.




BTW......Good luck c-man

[phrog]

I didn't win again. Next time, maybe I should buy a ticket.

[phrog]

Zephyr Springs, Florida Publix, C'man. Are you the winner?

[cabinetman]

zephyr springs, florida publix, c'man. Are you the winner?

Are you kidding me!!!!!

.

[durango dude]

Take the probability of winning, multiplied by the value of the win. We learned that formula in corporate finance class.

You'll want to reduce the value by:
- taxes
- chances that you'll share the prize

For me - I play once the jackpot goes above 500 million (the odds of winning are about 1 in 175 million ---- figure in taxes at 35 percent - and then cut the value in half, since the number of participants goes way up when the jackpot is that high).

It's not a science - it's just basic rough probabilities. In the end - like I said earlier, I have a 99.9999 percent chance of wasting my time and money. But you know - dreaming is not a bad thing every now and then.

For my Master's degree, I helped a guy study the Illinois lottery. The bulk of the proceeds for the Illinois lottery come from low income regions. The lottery distributes a portion of funds to educational institutions (mostly in upper income regions). We didn't have a lot of question about the regressive nature of the lottery.