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Double the price of that Powerball

Adriene Hill Jun 30, 2011
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Double the price of that Powerball

Adriene Hill Jun 30, 2011
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Jeremy Hobson: It was announced this week that the price of a Powerball lottery ticket will double from $1 to $2 in January. And strangely, lottery officials think that’ll push sales up.

Marketplace’s Adriene Hill explains.


Adriene Hill: Lottery officials will also double the starting Powerball jackpot to $40 million. And improve the chances of winning the grand prize, ever so slightly, from 1-in-195 million to 1-in-175 million.

Alan Yandow chairs the group that runs the Powerball lottery. He says higher ticket prices will mean bigger jackpots, and…

Alan Yandow: Jackpots drive sales. The quicker you get to a jackpot that people feel like is relevant to them, the more they are likely to play.

I asked University of Maryland economist Melissa Kearney what she makes of Yandow’s reasoning.

Melissa Kearney: It makes sense.

She says, at some level, lotto players have a sense of the “actual price” of a lottery bet — the printed price minus the expected value. As the payouts increase, sales go up.

Kearney: So on some level, people are behaving as you would expect investors to behave, like buying more or investing more when the return is higher.

Kearney says there’s another value to lottery operators in attracting new players with high jackpots: some people just keep playing.

I’m Adriene Hill for Marketplace.

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