THE EFFECTS OF LOTTO GAME CHANGES AND LARGE JACKPOTS ON INCOME ELASTICITIES AND SALES

Abstract

Using daily lottery data from Washington State by zip code from January 2011 through mid-March 2016, we estimate that Powerball income elasticities range from −0.16 to 0.16 as the Powerball jackpot increases from its minimum to $1.5 billion, while Mega Millions income elasticities range from −0.08 to 0.03 as the Mega Millions jackpot increases from its minimum to $640 million. Controlling for jackpot size, each of three major game changes during this time period has a significant effect on own-game and cross-game sales. Despite these significant game changes, however, these lotto games are a highly regressive source of revenue for Washington State. (JEL H22, H71, L83).