Expectation values and the common man

[KrazyHorse]

http://www.cbc.ca/canada/toronto/story/2006/10/04/lotto-toronto.html

Dream of big cheque nets 85-year-old double lotto win

An 85-year-old Toronto woman says a dream about a giant cheque prompted her to buy a second winning lottery ticket for the same draw.

Mary Wollens had two of the three winning tickets for the weekend Lotto 6-49 draw, giving her two-thirds of the $24 million jackpot — $16 million.

The other winner was 64-year-old Ramon Sanz, a retired telephone operator from Abbotsford, B.C., who went home with a cheque for $8.2 million.

Wollens told lottery officials she saw a lotto ticket and a large cheque in a dream a couple of days before the Sept. 30 draw and went out to buy a second ticket, using the same combination of numbers she had received on an earlier quick pick ticket.

She credits the dream with making her buy the second ticket. If she hadn't bought it, Wollens would have split the win equally with Sanz, taking home $12 million.

Wollens told the Toronto Star she plans to take a trip to Las Vegas for some gambling and will also move to a new home.

The former house cleaner has one son and one grandchild. Her daughter died 17 years ago and her husband died seven months after that.
With files from the Canadian Press

[Whoha]

did she get the lump sum? or payment over time?

[Jon Miller]

I think it is often payment over time, but you can get it transfered to a lump sum at the cost of 10% or something.

JM

[Jon Miller]

She should give most of it to charity.

JM

[Wezil]

Absolutely amazing luck.

[KrazyHorse]

Originally posted by Jon Miller
I think it is often payment over time, but you can get it transfered to a lump sum at the cost of 10% or something.

JM

Canadian lottery winnings are given as lump sums, and are exempt from taxation

[KrazyHorse]

everybody understands how stupid this was, right?

[Sir Og]

My dream last night was about me having sex with a gorgeous woman. I wander what this means and what should I to for this to become a reality

[Nubclear]

Do what the woman did: Buy one.

[snoopy369]

Indeed... this is just going to encourage more people to be stupid put more money meaninglessly into the lottery system

KH means that two chances at $12 million should be worth far, far more than a single chance at $16 million. Not to mention the fact that the odds are against having even one splitter. Unless you need $14 million for something, anyway, which most people who don't have $1 million can manage fine with $12

No taxes on lotto winnings, though? Wow ... you folks are insane over there. I definitely feel they should be taxed...

[DanS]

Yes, it's amazing how stupid this was and even more amazing that it turned out well for her.

[KrazyHorse]

Originally posted by snoopy369
No taxes on lotto winnings, though? Wow ... you folks are insane over there. I definitely feel they should be taxed...

The government makes its money once on the lotto. It doesn't get to make it twice.

[Arrian]

The IRS finds your lack of faith disturbing...

Incredible dumb luck, btw. Wow.

-Arrian

[snoopy369]

Originally posted by KrazyHorse


The government makes its money once on the lotto. It doesn't get to make it twice.

Well, it's the same money one way or the other, presumably. Just a matter of who pays it. Let's say you want to make about a 50% profit on ticket sales.

Taxed:

$100m in ticket sales
$80m in prizes, consisting of a top $40m prize, ten $1m prizes (5/6 balls), $5m additional in $100k prizes, and $25m in small prizes.
Net: $20m
Tax: $20m on the top prize, $5m on the second prizes, $1.5m on the third prizes, and $2m on the small prizes (assuming many of those people pay little taxes).
Net tax: 28.5m
---
Net: 48.5m on $100m ticket sales, or about 50% profit.

Not taxed:
$100m in ticket sales
$50 m in prizes, consisting of a top $25m prize, ten $750k prizes, $2.5m in additional $75k prizes, and $15m in small prizes.
Net: $50m.
-----

Both systems give you a net of about 50% (and my tax estimates are not necessarily accurate, I don't know the tax brackets for winnings, but the prize $ can be adjusted for that).

But one system allows you to advertise a top prize of $40m, while the other system allows you to advertise a top prize of $25m.

Which is likely to ultimately generate more ticket sales? And, more importantly from an economist's point of view, who does the majority of the money come from in each scenario?

In the "Taxed" scenario, 80% of the ticket money is paid back to the purchasers, and 40% of the net governmental income ($20m) comes from the "big winner", who doesn't really mind the fact that they 'only' won $20m. A fairly large percentage of ticket buyers - let's say 10% - win something, as the total pool for 'small prizes' is 25% of the total take. Only 20% of the governmental income comes from "losers".

In the "Not Taxed" scenario, all of the net governmental income comes from the "losers", and only 15% of the total take is given back in "small prizes", so maybe 6% of the players win something. That's a HUGE difference in perceived winning - and more importantly, it makes the lottery more unfair and more harmful to the society, as a significantly higher percentage of people exclusively lose money.

[Wezil]

It's already 'unfair' - it is a tax on the math impaired.