Abstract
ABSTRACT State lottery consortia in the U.S. substantially redesigned their largest jackpot games, Powerball and Mega Millions, to stimulate sales revenue for their member states. The odds of winning the jackpot in each game were lengthened to increase the probability of larger jackpots, the minimum jackpot was raised, and ticket prices were increased from $1 to $2. This paper estimates the demand for Powerball and Mega Millions using drawing-by-drawing aggregate U.S. sales revenue and advertised jackpot data from 2010 to 2019. Each game achieved a record-breaking jackpot of about $1.5 billion during this period. We find that each game’s redesign lowered the elasticity of sales revenue of the game with respect to the size of the game’s jackpot while significantly increasing the average size of the jackpot. We also estimate the impact of each game’s redesign on sales. Finally, we estimate cross-game effects of game redesigns and jackpots.
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