22 Mar 2011

NY megamillions jackpot: it is rational to buy a lottery ticket today (3/22)?

gattis recommended this 2 hours, 34 minutes ago

The expected value of a ticket has gone above the price for tonight's drawing. Depending on your risk profile, it may be actually be rational to buy a 


ticket.

9
gattis

gattis commented 2 hours, 31 minutes ago

To spread the risk variance we started an office pool with 40 tickets so far. Take a phone picture of your ticket(s) with a signature and email it to winners@mit.edu if you agree to join the pool.

gattis

gattis commented 2 hours, 28 minutes ago

And do so before the drawing at 11pm... you don't want to be the only one who's not filthy rich!

hugo

hugo commented 2 hours, 20 minutes ago

i wonder if anyone has ever before flashmobbed the jackpot to game it?

gattis

gattis commented 2 hours, 15 minutes ago

You can but the more people you add, the smaller the variance is, and the closer you're likely to get to the 11% or whatever return. Some guy at MIT actually did this and made a successful hedge fund for the MA progressive jackpot.

hugo

hugo commented 2 hours, 4 minutes ago

@gattis LOL

chris

you commented 1 hour, 1 minute ago

on twitter someone made the good point: @cdixon Not post-lump sum, post-tax. Last time I tried to do the math, I ended up at a $561 million jackpot or something.

gattis

gattis commented 6 minutes ago

The cash option for the jackpot is $155.7M and the chances for a jackpot are 1/175.7M, plus there are a bunch of other prizes (1/4M for $250K, etc). If you multiply the cash values by the probabilities you get about $1.07 as the value of the ticket. Your losses are also tax deductible so that offsets the tax penalty for winning depending on your income bracket.

gattis

gattis commented 4 minutes ago

Real unknown is how many people will play and split the jackpot, but historically it has averaged out to about 1

gattis

gattis commented 2 minutes ago

Plus if you invest you can get a much greater % return on $156M than you can on $1. Rich get richer.