Parimutuel Lotteries: Gamblers' Behavior and the Demand for Tickets

In a parimutuel lottery, players face a strategic situation. We investigate how rational lottery players should choose combinations of numbers. Using data from the Austrian Lotto we compare this to actual behavior. We propose a relationship between the number of tickets and the expected loss of taking part, based on both theoretical and empirical findings about players' behavior. Rollovers introduce exogenous price variation allowing to estimate properties of a demand function sensitive to the expected loss. Contrary to previous work our model accounts for conscious selection.