Lottery Advertising and Demographics

Statistical data show that lottery players who earn less than $10,000 per year spend more on tickets than people with higher incomes. However, lottery advertisements focus on jackpot amounts, not odds of winning. There are several factors contributing to this. Listed below are the most significant ones:

Lottery players with incomes of less than $10,000 spend more on tickets than any other income group

According to a Bankrate survey, lottery players with incomes under $10,000 spend nearly twice as much on tickets as those with higher incomes. This may sound like a small amount, but lottery tickets add up to nearly $412 a year, a significant amount considering that the average American household does not have an emergency fund. In fact, lottery players with lower incomes spend an average of $2,118 per year on tickets. That represents 13 percent of their incomes.

The reason that lower-income lottery players spend so much on tickets is unclear, but they are at a greater risk of winning. Regardless of how much they win, lottery players with lower incomes are more likely to buy more than those with higher incomes. In a Carnegie Mellon University study, lottery players with incomes below $10,000 were nearly three times more likely to buy the maximum five tickets than other income groups. Perhaps the low-income groups buy tickets as a way to cope with their feelings of hopelessness and poverty. Others speculate that it’s because of the chance to win a large amount of money and the fact that lottery tickets are available to everyone.

Lottery advertisements that focus on jackpot amount but do not list odds of winning

While lottery officials maintain that they are not targeting a specific demographic, the results of a study commissioned by the Maryland Senate suggest that many people are confused about how to interpret the ads. The study compared lottery advertisements in four states and found that most of them focused on jackpot amounts, not odds. Moreover, many of the lottery advertisements emphasized the lifestyle transformation a winner can achieve. However, there were no such statistics for second-place prizes.

In 2011, a Mega Millions website featured the headline “Save for Retirement” without mentioning the odds of winning the jackpot. While the odds were one in 175 million, the headline was criticized by anti-gambling groups. The goal of these advertisements is to inflate the value of the prize, which is often paid out in installments over twenty years. However, taxation and inflation reduce the current value of lottery prizes significantly.

Loss of quality of life due to lottery winnings

In empirical analyses of the relationship between lottery winnings and health, the distribution of the prize money is in log form, and winners are generally healthier. While the authors note that the results may be skewed, they conclude that lottery winners are happier, have better physical health, and make healthier choices. These findings are consistent with previous research. However, lottery winners are not expected to be healthy, and the effects of winning a lotto ticket may be underestimated.

In a recent study, Winkelmann et al. found that lottery winnings have an impact on people’s well-being up to three years after they won the jackpot. In fact, their results are consistent with the idea that people who have won a lottery prize are deserving. Although this may be true in general, this effect has a delayed effect on life satisfaction. The study authors explain this result by assuming that financial life satisfaction is a key mediator of happiness.