Analysis of Large Mega Millions Rollovers

Abstract

From May 17, 2002 to December 30, 2014, there were 1,318 Mega Millions drawings and 153 were winning drawings. In 148 out of 153 winning drawings, there was no winner(s) in the first drawing and the jackpot prize was rolled over and added to the next drawing. Since the Mega Millions does not have a rollover limit, this process continues until there is an eventual winning ticket. If there are no winners over a month, the jackpot prize will approach $100 million. As the jackpot prize approaches $100 million, significantly larger additional cash flows into the lottery. Based on the analysis of 29 large Mega Millions winning drawings (jackpot prize ≥ $100 million), we report the following findings. First, significantly larger additional money flows into the lottery as the jackpot prize gets larger, and over 90% of the additional cash inflow is spent on Mega Millions tickets. Second, for the entire sample there does not appear to be reallocating of funds taking place within lottery games. However, when total sales declines or changes in Mega Millions sales is greater than changes in total lottery sales, a small amount of money (less than $0.20 per capita) being transferred from Instant Games to Mega Millions appears to take place. Third, zip-codes with a higher average family income or residents with more years of schooling experience a significantly higher demand for Mega Millions tickets. In addition, as the percentage of white or Asian-Americans in an area increase, the demand for Mega Millions increases by a significant amount. Lastly, as the jackpot prize gets larger, lottery players from all income levels spend more money on Mega Millions, but over 80% of the additional money comes from consumers belonging to the upper-middle or higher income brackets.