Minor Change In A Game
Lately, Canada’s national lottery game Lotto 6/49 increased its price per entry from $2 to $3. Promotional materials suggested that to compensate for the necessary change there is now a guaranteed price draw of one million dollars every draw. Well, since Lotto 6/49 is really the only game in town, those who like to play the lottery has no choice but to accept the price increase.
There is one other lottery game offered by the crown corporation called Lotto Max. It is more expensive at $5 per entry and its main target audience are those who are attracted to bigger prize pools. Since I am not talking about comparative advantage here I will not go into details about this other game.
Changing A Successful Game
Is it really true that it is just a routine price increase for the lottery corporation to collect more money or is there something more behind the change?
Due to the fact that Lotto 6/49 is pretty much the only game of its kind available in the country, there is little prize sensitivity to the price increase. In general, people buy lottery tickets on a budget, not on the fixation of the number of tickets. Hence, the expected revenue should be about the same.
Notice that as the total sales by amount stays the same, the number of entries sold decreases. This leads to the reduced probability of the jackpot being won. The other prizes also face a similar reduction in number of winners.
Based on the number of winning entries reported by the corporation, this is exactly the case.
Real Intention Exposed
The intention is now clear – instant increase in profit every draw. Going forward, as people tend to get numb to the price increase while lured by the increased size of the jackpot due to less frequent winning, the ticket sales will resume its normal growth.
There is one problem though, how to ensure people who used to purchase one or two entries per draw to continue to participate due to the price increase? These are the people who will most likely drop the habit of buying lottery tickets for good. I think it is a good thing but the lottery corporation probably has something else in mind.
This is where the guaranteed prize draw comes into play. By offering a separate prize of one million dollar every draw, these players who are most affected have an extra incentive to stay with the game as they now have two chances to win some big money.
All Angles Already Covered
This million dollar guaranteed prize has to come from the ticket sales. Dropping a million dollar of the revenue back into the hands of the players may sound stupid but it was a calculated move. The million dollar prize is draw from the tickets sold. Every ticket has a unique number identifying the ticket to make the draw possible. Each ticket, however, can have more than one entry to the regular part (the one with the jackpot) of the game.
In other words, those who bought their tickets with multiple entries to the draw are paying extra money with significant lower chance of winning the guaranteed prize on a per entry basis.
All the players are stuffed with a very bad deal covered with icing on top as disguise.
To Even The Playing Field
Existing players have to fundamentally change their habits of buying multiple entries per ticket to the lottery game in order to even out the disadvantage.
Many players use the form offered by the lottery corporation to buy their entries to the draw. These forms allow the players to fill up to 10 entries per ticket. This is the trap.
It is important to play only one entry per ticket from now on to optimize the value a player paid for. But how many people actually notice the difference?