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Wednesday, March 23, 2005

Lottery Experiment - An Itch to Scratch

Observation: Popularity of scratch-off lottery tickets remains high despite their low odds of winning. The attraction of exponentially increasing an "investment" of $1 with no skill involved draws people to these games.

Hypotheses: If a $1 scratch-off lottery game is played 100 times, the player is likely to lose money in the end. Most people playing the game will eventually lose money, only a few will gain.

Variations: A player can potentially win a large sum of money on the first play with some "luck" on their side.

Experiment: 100 Texas Lottery scratch-off "Amazing 8's" games costing $1 each will be purchased. 20 games will be purchased from 5 seperate establishments. Amazing 8's have odds of 1 in 4.65 games at least break even.
---------------------------------------------
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Step 1
I withdrew $100 in cash from an ATM and bought 20 Amazing 8's from each of these five establishments: Albertson's, Chevron, Diamond Shamrock and Exxon. The whole process took me an hour as some places I visited did not have Amazing 8's.

Step 2
Counted and verified that I had exactly 100 Amazing 8's scratch-off lottery tickets.



Step 3
Got my trusty tools ready: Two quarters. One is an American quarter and the other is a Canadian Quarter. I've found that Canadian quarters are much better for scratching mass amounts of lotto tickets!



Step 4
Start scratching! I would scratch and scratch until I found a winner, which would then be placed inside the "Winner$" basket.





Scratching 100 lottery tickets is NOT as exciting as I thought. It felt more like a boring job. Next time I do gambling experiments, I'm goin' ta Vagas.

The "Winner$" basket.




Winner$ basket starting to fill up with $1 and $2 wins.





The real gem of the lot was this ticket which won $60! The chances of getting this are 1 in 1,500.


Step 5
Tabulate each amount won.



Losers were placed on the table, and the proud winners were put higher up on the stool (Just for a more dramatic metaphorical effect)


Step 6
Report the totals. I came out ahead with $102! A 2% return.



The proud winners in all their glory, especially our champion: Mr. $60!

After the experiment was completed, I went to the grocery store to cash in my $102. I then proceeded to the Bank of America ATM and deposited the cash directly back into my investment account. So I performed this experiment and MADE $2 and learned a little too!

Step 7
Conclusion. This "investment" of $100 was more of an experiment and should not be used as investment advice. Anyone who invests their money in the lottery for purposes other than mild thrills and entertainment is (according to the odds) just dreaming. The odds prove that if you play long enough, you will lose 75% or more of your money. Of course you can also win a lot of money, but it's highly doubtful. I just happened to buy the right tickets at the right time for this particular experiment, but if I repeated the experiment again, I would most likely not make a profit or break even.

Hope you enjoyed the experiment, I sure did!


Labels:

44 Comments:

At 5:52 PM, Anonymous Anonymous said...
I was actually expecting you to lose some money. Congratulations you lucky SOB!!

 

At 6:05 PM, Blogger MrsB said...
All that work for less than minimum wage? :-)

 

At 6:13 PM, Anonymous Anonymous said...
Be sure to double-check your losers. I've found discarded winners three times that I can recall.

 

At 7:00 PM, Blogger Fantonim said...
2% on a day-worth investment????
sure beats GICs!
Cool blog, come visit mine fantonim.blogspot.com, just starting out though.

 

At 7:30 PM, Blogger Neville said...
Mrs. B, at least I can now tell all my friends "So, I spent $100 on lotto tickets today" :-)

I've also got every major gas station and grocery store around me thinking I have a gambling problem!!

 

At 7:36 PM, Blogger Our Money Staff said...
That's hysterical. What would happen if a group of people pooled there money together in a similar experiment, this time each person would fork over $100 to the pot.

 

At 7:37 PM, Blogger Our Money Staff said...
Let's say a group of 10 people. Hmmm.
http://ourmoneyourfuture.blogspot.com/

 

At 8:58 PM, Blogger Neville said...
Our Money Staff,

The more money you spend doing this, the more of a chance your game will revert back to the mean. This means you will probably lose money and have 10 very mad people, that's why I did this with only my OWN money!

On the other hand, it would be exciting for 10 people in a room to scratch of 1,000 lottery tickets :)

 

At 9:23 PM, Blogger Alpha said...
That was a pretty cool experiment Neville!
I kept checking your blog through-out the day for it to be updated.
Any chance of doing a similar experiment?

 

At 9:30 PM, Blogger Neville said...
Well, as always I will continue to post my (non-confidential) money adventures here

If you have any wacky ideas for me to try out, let me know. I'm always looking to learn about new areas.

One surprising outcome of this experiment: It completely turned me off from scratch-off lotto's. Since I beat the average and broke even and then some, law of averages tells me not to touch them for a long time!
-Nev

 

At 10:02 PM, Anonymous Johnie said...
Good job.
Now you do realize that there is tax on gambling/lottery winnings. So your $2 x .75 [assuming 25% tax] = $1.50 after tax winnings
Factor in gas cost to go out and purchase the tickets...

But anyways, that was a fun experiment.

 

At 12:55 AM, Blogger Cap said...
lol. I kept scrolling down expecting to see a big fat RED and some negatives.. but u came out with 2 bux. albeit the time and other cost throws it off, but at least u didnt completely lose the $100.

 

At 6:28 AM, Anonymous jim said...
You should frame the $2 with a couple losing tickets so you have a story whenever someone asked you why you framed two sorry dollars. :)

On a bright note, I saw you had GE long in your portfolio, they just raised Q1 profit forecasts... which is good for you. Better than $2 anyway... haha.

 

At 5:33 PM, Blogger Jonathan said...
Aww, you almost had me with that picture of the $800 winning ticket! Good stuff - nice tip on the Canadian quarter ;)

Jonathan@MyMoneyBlog

 

At 4:15 AM, Anonymous Anonymous said...
Did you see this news? You would have to depreciate your quarters against this much scratching - but it seems to pay more than the minimum...

LONDON (AFP) - A global lottery syndicate based in the Philippines is the winner of a 16.6 million pound lotto jackpot, the Sunday Times newspaper reported.

Overseas Subscribers Agents (OAS), which plays European and US lotteries on behalf of members worldwide, had bought up to 14,000 tickets for the January 2 draw, the sixth biggest in British lotto history.

The tickets were purchased on behalf of OAS by a retired plastics technologist, Ken Jackson, to get around a rule that restricts the National Lottery to residents of Britain and visitors to the country.

 

At 4:19 AM, Anonymous Anonymous said...
BTW, I saw your blog in the UK weekend FT. Good luck with your ambitions, and respect for your approach. Unfortunately I could not seem to create an identity (kept refusing any username). Tim

 

At 11:53 AM, Blogger Jose Anes said...
Great blog. Great experiement and documentation. You became my inspiration today.

www.aneshome.com/weblog/money/

 

At 2:32 PM, Anonymous J-P said...
Loved the data. Mr. $60 saved your bacon. Thanks for sharing.

 

At 6:52 PM, Anonymous Anonymous said...
Neville

I ran into a UK blog on this subject years ago, and now the site is in use by others. Alas, it too, was an informational/hobby site.

He proposed to examine the thesis that the innumarate cling to in forlorn hope, to whit, 'SOMEONE'S gotta win'. First he destroyed that propsition (which is a lie), and then he proposed a different examination of the lottery.

He proposed rightly, that the lottery exists in time and space, and yet if the results are not available, it does not cease to exist, yet the results are just as unpredictable. To whit; In the abscence of anyone reading this to correctly recite any of the numbers used in 2002, 2003, or 2004, then they are as genuine as next weeks as yet undrawn number. More precisely, if you choose a strategy for next week, you can apply it to the past and measure its results as a reliable predicotr of the future.


Here are the rules he used, and then documented.
He would buy 10,000 Pounds of tickets for each 6 number drawing, and apply the same numbers throughout the last 100 weekly drawings. Expenditures, then, will be 1,000,000 Pounds, and winnings will add up to whatever happens. He took the official numbers from a time starting 1 year earlier, and began tabulating his winning 3,4,5, and 6 number winners.

He won many 3s, several 4s, and a few 5s, and no 6 number jackpots, and I believe the total losses were about 650,000 Pounds.


In conclusion, the Lottery is a 'stupid tax', and 'a tax on hope, and innumeracy', and in truth, just a tax. I am always primed to respond if I am asked about the lottery, "I don't qualify." I am always challenged, and I gladly point out that I am not stupid, (just brash) and therefore do not qualify. Further, the failure needed to exploit people is innumeracy, and since Governemnt educates people on the one hand, and also profits by controlling the Lottery that exploits their lack of education and lack of integrity, and character, I find it reprehensible, and self serving to exploit the masses the government misleads into playing an immoral, unethical, and otherwise illegal fraud.

In view of your amazing 1500:1 hit, I suggest that in 15 experiments such as this, you will lose $700-800.

As a short aside I also comment to those who bring up the lottery, that the chances are in the millions. The chances, however, of being struck by lightning are lower than being struck with the winning numbers, although the disasterous effects are often closely parallel, and many good studies on that have been made. In short, I hope you never win, and never meet anyone who has. It's a disaster.

I realy like the site, and I chanced to find it. Now, I shall examine it at length, I believe.

 

At 8:10 PM, Anonymous crl826 said...
Nice. I run a website that tracks how many scratch off tickets have been sold and how many prizes have been won so our subscribers can get a real time picture on what game has the best odds. Its only for Texas scratch off games right now.

www.bestscratchoff.com

I hope this isn't spam. I would love to talk about it more if there is any questions/interest.

 

At 8:44 PM, Anonymous Anonymous said...
uibb kjbnlk lb lk nlk

 

At 7:07 PM, Anonymous Anonymous said...
Very lucky and somewhat fun experiment!

http://oilstories.blogspot.com

 

At 12:37 AM, Anonymous Tim MMF said...
With all the driving around you did and time you spent, you definitely lost money. But it was a cool experiment anyway. :)

 

At 12:39 AM, Anonymous Forex Basics said...
Nice experiment. I play the lottery nearly everyday for fun, and I've actually noticed the same thing about Canadian quarters and their amazing scratch-off abilities. Haha, weird.

-Greg

 

At 3:38 PM, Anonymous Jehan-Pierre du Pont said...
Played the Amazing 8's in New York city, bought 50 tickets at same retailer a liquor store. Won $8,888.00 however the city and state and federal taxes took out the following:
Federal $2,222.00
State $ 684.00
NYC 369.00
Total award after taxes $5,586.00 from a $50.00 investment

 

At 3:38 PM, Anonymous Jehan-Pierre du Pont said...
Played the Amazing 8's in New York city, bought 50 tickets at same retailer a liquor store. Won $8,888.00 however the city and state and federal taxes took out the following:
Federal $2,222.00
State $ 684.00
NYC 369.00
Total award after taxes $5,586.00 from a $50.00 investment

 

At 3:38 PM, Anonymous Jehan-Pierre du Pont said...
Played the Amazing 8's in New York city, bought 50 tickets at same retailer a liquor store. Won $8,888.00 however the city and state and federal taxes took out the following:
Federal $2,222.00
State $ 684.00
NYC 369.00
Total award after taxes $5,586.00 from a $50.00 investment

 

At 5:06 AM, Anonymous Real People, Real Finances said...
You need to do a similar experiment playing poker or roulette in Vegas

 

At 10:35 PM, Anonymous Credit Servicer said...
Odd of 1 in 1,500 and you hit?! You are lucky.

Keep up the interesting experiments.

 

At 3:00 AM, Blogger Ontrapranewer said...
The first and last ticket my ex had ever bought was a $1,000 winner

 

At 9:53 AM, Anonymous myretirementblog said...
This is why the lotto is popular, people believe they can come out ahead.

 

At 9:54 AM, Anonymous grill maestro said...
hahahah this is hilarious

 

At 2:21 PM, Anonymous Anonymous said...
very surpised you won anything man,

here in ireland awhile back two teenagers had what they thought to be a great money making scheme,
they scratched a whole roll(s?) of lottery tickets in a shop they worked in, thinking they'll just pay for it with all the thousands they'd win, were they in for a surprise, there was MUCH MUCH less on them than the cost of the tickets, infact there was very little money on it at-all. but im glad it proved what a scam they are.

the lotto is a pure rip-off, supposed to help people in need, be a bit of fun & create millionaires overnight,
what a complete load of shite,
first of all for some magical reason 90% of the time theres a roll-over on bank hoildays etc, i know someone still wins but so what its still rigged.
before if you matched 3 numbers you win a grand total of 1 euro, but ohh no thats too much & then they add insult to injury, they give you a scabby 1 euro scratch card, so infact you win notting in most cases, that should be illegal, for four number you might get a tenner.
i got FIVE numbers before, (4 and the bonus) all i got was 70euro mudaf*^(!~s i thought i won thousands, the bookies are much better, for that match i'd of won 25,000 for a 1 euro stake & its tax free, which i cant belive it is'nt in the states. or for 3 numbers 250euro with bonus ball 450euro with it inclued. 50 for 2 numbers thats reasonible, cause even 3 numbers is hard to get.

they have since improved it, they've put up the price, added 3 extra numbers and very generiously upped the winnings to 3euro for a match 3 on the first and 2nd draw but not the 3rd???, i wish someone would set up a peoples lottey but theres no way they'd get a licence.

scratch cards are even worse here, the most ive heard anyone ever was 50euro, theres 1, 3 and 6 euro scratch cards and all you ever get on them is a free, 2, 4 or if your really lucky 8 euros.

its legal robbery is what it is.

glad to get that mad rant of my chest.


peace all & good luck

 

At 7:41 AM, Anonymous fellow scholar said...
very well done, you should consider publishing ur findings.

 

At 9:41 AM, Anonymous Anonymous said...
I bought 20 $5 scratchers, total cost $100, and won the merchandice prize, a leather suit case worth a reported $233.

 

At 9:34 AM, Anonymous Anonymous said...
The reason many people like myself play scratch-off tickets is because they can get a lot more play for their money than at a casino or any other form of gambling. It would be interesting to see how many tickets you would have gone thru if you kept reinvesting the money until your $100 was gone.If you had used a Lottery Mate scratch ticketplayer, your experiment would have been a lot more enjoyable for you!

 

At 12:09 PM, Anonymous Anonymous said...
I always find that losing $1000 hurts more than the joy of winning $1000. Thats why I don't play lotto.

 

At 3:14 PM, Anonymous Anonymous said...
The best return (i.e. least negative return on lotto scratchers in Texas) comes from the most expensive tickets. You would have had more expected value had you bought 5 $20 scratchers (at a cost of higher volatility). Also, did you know that each pack of lotto tickets has a GUARANTEED payout? If you buy an entire pack and it performs below the guarantee, you can take it to the lottery commission and they will issue you a payment to bring your pack up to the guaranteed payout.

 

At 8:51 AM, Blogger Patrick said...
I once played the CA Lotto version of Keno: Bulls-Eye!

I always have beginners luck.

The cheapest ticket was a buck, two numbers. I picked my birthday. 10-28. Hit the 10, bulls-eye on the 28.

I flipped the ticket over and saw the odds of that are 1:166. I went to the bartender to claim my prize...

...Nineteen bucks.

In Vegas, a 1:166 bet would pay out somewhere in the neighborhood of $145 to $160. I got nineteen bucks.

The lotto is a rip-off.

-p
financialilliteracy.com

 

At 6:32 PM, Anonymous Anonymous said...
Very cool experiment! I definitely thought you weren't going to make your money back, but that $60 ticket made all the difference!

Free Online Lottery

 

At 7:52 PM, Anonymous Anonymous said...
I appreciated the step-by-step analysis to lead through your experiment, Neville! (Especially the photo placing the winners up on the stool for effect, very nice work.) I know a guy in Boston who won the downpayment on his house playing Lotto... and he continues to play to this day. Somehow, people think that because one person got incredibly lucky on one day, that they have some insurance it will happen to them, too. Yikes.
Jerry
www.leads4insurance.com

 

At 8:41 AM, Anonymous David said...
Hi,
it seems like here in Belgium we don't need to do all these experiments ... for all the official scratch lotteries that exist you can find the exact division of winning tickets on the official lottery site.

They say f.e. that 70% of the revenues will go back to the winners. And then they give an overview of all tickets, like this :
For each 1.000.000 tickets there are :
1 winners of 25.000 euro
10 winners of 5.000 euro
...
20.000 winners of 1 euro.

Total revenue : 1.000.000 euro
Total pay-out : 700.000 euro

This means that you are guaranteed to lose 30% if you could buy all the tickets.

But that's the game and you know it, the happy few win, the rest had a nice dream for a few moments.

The only way to win is if you could have your tickets for free ... and that's exactly how I play my lottery.

 

At 12:16 PM, Anonymous The Masked Millionaire said...
I won $350 million dollars in the lottery. I didn't have any fancy system. I'm not that smart. I was a truck driver and now I'm rich. All from buying just one lottery ticket.

I started a blog so that other people can follow my story.

The Masked Millionaire
www.TheMaskedMillionaire.com

 

At 10:02 AM, Anonymous Anonymous said...
There are some things to consider when purchasing scratch off tickets. When the tickets are brand new to the system, there are usually a lot more winners. The state does this because people see a new game and they give it a try. They then see they win 2 or 3 times in a set of 5 tickets, so they keep buying more and more. Their odds slowly dwindling. Also, fresh rolls, where the ticket number is 1-10...

 

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