Lottery pricing and price elasticity dispersion in the UK and Canada |
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Authors: | G Geronikolaou G Papachristou |
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Institution: | 1. Department of Economics, Democritus University of Thrace, Komotini, Greece;2. Department of Economics, Aristotle University of Thessaloniki, Thessaloniki, Greece |
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Abstract: | We estimate effective price elasticities for different quantiles of the demand distribution of the UK National Lottery and the Canadian Lotto 649. We show that price elasticities vary significantly from draw to draw and have a tendency to increase with lottery participation and jackpot size. Our findings indicate that setting lottery rules on the basis of mean effective price elasticities should be faced with caution because expected profits are negatively related to the evident variation of elasticities among lottery draws. We also simulate alternative active rollover distributions and show that limiting the rollover accumulation by withholding portions and ploughing them back in future nonrollover draws is potentially profitable. |
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Keywords: | Effective price lotteries price elasticity quantile regression |
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