Why do people play the lottery?

Millions around the world play the lottery. In the United Kingdom, 70% of adults over 18 play on a regular basis – that’s around 45 million people – with 50% buying at least once a month and a minimum of 3 tickets each week.[1] In the United State, 57% of Americans buy one ticket per year at least – around 180 million people – contributing $21.8 billion USD to government funds in 2014.[2]
 
In Canada, 25% of the population play the lottery every week, averaging $265 per household annual spend on the lottery, with sales of $8.5 billion CAD in 2011. The odds of a pay-out are between 1 in 13.9 million to 1 in 28.6 million per game.[3]

This means not only do millions play the lottery, but millions also lose.

If the vast majority of lottery players will lose, why do people play the lottery?

Given that even though most lottery players are going to lose their money, what explains the huge numbers of participants? We can easily take the normality of playing the lottery for granted, since so many people participate, but looking at the facts paints a muddy picture of irrationality:

• Jackpot size. Research has found that demand for lottery tickets increases with the size of the jackpot.[4] However, attracting more participants also increases the probability of multiple winners.

• Consumer Income. A number of scholars have found that a relatively greater percentage of income is spent by lower income levels on lottery products.[5] In the UK, consumers receiving government benefits are 4% more likely to play the lottery.[6] Large jackpots tend to attract more affluent customers while instant games attract lower income participants.[7]

• Expectations. A 2011 study by Environics Research and TD Waterhouse found that 32% of Canadians between the ages of 45-64 are counting on lottery winnings to support their retirement rather than savings and investments.

It’s reasonable to question the rationality behind purchasing that lottery ticket. Behavioual Economics and Consumer Psychology might offer clues to the powerful force behind why so many play the lottery. 

• The Availability Heuristic. Lottery sales might be a product of very effective marketing. The availability heuristic refers to the ease at which an example comes to mind, and how this ease is subsequently interpreted as being more important or a more probable outcome.[8] It is easy to recall a conversation with a friend about what you would do if you won the lottery. I would wager (haha – get it?) that less often do you have a memorable conversation about not winning the lottery – despite the fact that this happens all the more often. Flashy lottery advertisements depicting a life of luxury and ease and news articles about lottery winners have created a strong mental association for many between the word LOTTERY and the image of you stretched out on a lounge chair on a beautiful sandy beach. The availability heuristic might be responsible for why so many are compelled to play the lottery – their ease of recalling past winners makes them overweigh the probability that they, too, could win.

• Mental Accounting. Mental accounting is when we split our money up into separate accounts based on subjective or arbitrary criteria, when money in and of itself is a fungible resource.[9] When asking some of my friends and family why they enjoy the lottery, they said the lottery was “entertainment”. Perhaps some of them take some money from their “entertainment” budget and spend it on the experience of the lottery. In this sense, they might already be at peace with never seeing that money again, same as if you were to spend the money on another experience like a movie or mini golf.

• The Gambler’s Fallacy. A classic heuristic can help to explain lottery ticket-buying behaviour. The gambler’s fallacy refers to how a player may change their beliefs about the probability of a particular outcome – that is, a combination of numbers - being drawn again after those numbers come up as the winning combination, even though each drawing in the lottery is an independent random event.[10] This is the classic example of tossing a coin 10 times, each time coming up as heads. The gambler’s fallacy would suggest an individual would be inclined to bet the next flip would be tails as it is due to come up, but each coin flip is an independent event with 50/50 odds. An individual playing the lottery over time might think they are due a win, but probability theory states that the odds of winning do not change with the results of past draws, but depend on the number of participant in that draw. Indeed, researchers have found that lottery players tend not to play numbers that have been recently won.[11] Surprisingly, winning the lottery doesn’t dampen the unbridled optimism that is sparked by the gambler’s fallacy - 70% of UK lottery winners believe they will win again the future.[12] This halo effect – that is, a cognitive bias in which an individual’s overall impressions about a product is influenced by its positive feelings and thoughts about that product[13] - can motivate what Grote and Matheson call lotto fever and see repeat patterns of lottery buying behaviour. Some scholars have found that lottery players in the UK over-select recent winning numbers in the period after those specific numbers have been won[14] or flock to a lucky store that has recently sold a winning lottery ticket, boosting sales by 12 to 38%.[15]

• Information Avoidance. It is possible that lottery consumers avoid acknowledging the realities of the odds of playing the lottery. There may be an incentive for a consumer to ignore certain information even if it could help them make a more strategic decision. Standard Economic theory would predict information is sought when it can help make a better decision.[16] Instead, individuals actively ignore information that is both freely available and that they are aware exists.[17] Avoiding potentially important information reduces the chance individuals can make adjustments from potentially destructive behaviours. Avoiding discouraging facts about the lottery – such as the astronomical odds – might be one such example of information avoidance. Although information avoidance doesn’t comment about the specific motivation to avoid certain information, the idea of searching out information congruent with existing beliefs and ideas is not new in consumer behaviour. Confirmation bias (or motivated search) is a cognitive bias that describes the tendency for individuals to infer meaning from information that confirms his or her pre-conceptions in a way that could deviate from a more objective interpretation.[18] Decision-makers seek out or put extra weight on information that supports what they want to believe. This might explain the high percentage of lottery players who believe they are going to win – despite the odds, there is a chance of winning, and confirmation bias pushes individuals to put more statistical weight on this occurrence than is accurate or appropriate.

• Self-Concept. The relationship between self-concept and lottery consumption has yet to be fully explored but there are promising aspects of research that allude to how buying lottery tickets can be explained by individualized aspects of the self. First, research has shown that parental participation is a strong predictor of lottery gambling.[19] Additionally, earlier exposure to lottery and gaming – for example, receiving scratch cards as a child – is more closely related with problematic gambling attitudes.[20] Normalization can be a strong force in legitimizing behaviours; indeed, the buying of lottery tickets might become ingrained as part of one’s self-concept. The interaction between lottery purchasing and self-concept may run even deeper, particularly when looking more closely at the relationship between lower income levels and more spend on lottery tickets. A 2008 experimental study in the Journal of Behavioral Decision Making finds that lower income individuals are potentially attracted to the lottery because it provides a rare occasion of a level playing field where the odds of winning distributed equally between ticket-holders rather than social-economic status.[21]

There might be a connection here between self-concept and positivity bias. Wanting to see oneself in a positive light, an individual is motivated to interpret their actions in the best way.[22] Having enough money to be able to spend on a luxury like a lottery ticket could signal to the individual that they are in a stable financial position when they might not actually be doing that well. Participation in the lottery might alternatively signal that the individual is savvy, not missing out on an opportunity to win much more than the cost of playing. Only when the jackpot is lost is it attributed to the astronomical numbers and the results being “out of my control”.

Other Perspectives 
Subscribers of psychology might argue that the positive reinforcement from variable-ratio schedules of reward explains why people play the lottery. From the school of Operant Conditioning, a schedule of reinforcement is a rule linking a specific behaviour with reward in order to strengthen a particular behaviour or response.[23] I don’t buy it – how does this explain why people continue to play when they have never won at all?

What do you think explains why so many people play the lottery? Comment below!



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[1] Lottoland (16 March 2016) The People Behind the Game – Lottery Demographics. Retrieved from: https://www.lottoland.co.uk/magazine/lottery-demographics.html. Accessed 7 Dec 2016
[2] Wihbey, J. (27 July 2016) Who plays the lottery, and why: Updated collection of research. Journalist’s Resource. Retreived from: http://journalistsresource.org/studies/economics/personal-finance/research-review-lotteries-demographics
[3] Patterson, A. (31 October 2012) Canadians Plan on Lottery Winnings, Inheritance to Secure Financial Future. Yahoo Finance. Retrieved from: https://ca.finance.yahoo.com/blogs/insight/canadians-plan-lottery-winnings-secure-financial-future-151838966.html
[4] Forrest, D., Simmons, R., & Chesters, N. (2002). Buying a dream: Alternative models of demand for lotto. Economic Inquiry, 40(3), 485-496.
[5] Suits, D. B. (1977). Gambling taxes: Regressivity and revenue potential. National Tax Journal, 19-35; Clotfelter, C. T. (1979). On the regressivity of state-operated" numbers" games. National Tax Journal, 32(4), 543-548; Clotfelter, C. T., & Cook, P. J. (1990). On the economics of state lotteries. The Journal of Economic Perspectives, 4(4), 105-119; Cook, P. J., & Clotfelter, C. T. (1991). The peculiar scale economies of lotto (No. w3766). National Bureau of Economic Research..
[6] Lottoland (16 March 2016) The People Behind the Game – Lottery Demographics. Retrieved from: https://www.lottoland.co.uk/magazine/lottery-demographics.html.
[7] Mikesell, 1989; Jackson, 1994; Garrett & Coughlin, 2009.
[8] Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive psychology, 5(2), 207-232.
[9] Thaler, R. (1985). Mental accounting and consumer choice. Marketing science, 4(3), 199-214.
[10] Clotfelter, C. T., & Cook, P. J. (1993). Notes: The “gambler's fallacy” in lottery play. Management Science, 39(12), 1521-1525.
[11] Clotfelter, C. T., & Cook, P. J. (1993). Notes: The “gambler's fallacy” in lottery play. Management Science, 39(12), 1521-1525.; Terrell, D. (1994). A test of the gambler's fallacy: Evidence from pari-mutuel games. Journal of risk and uncertainty, 8(3), 309-317; Papachristou, G. (2004). The British gambler's fallacy. Applied Economics, 36(18), 2073-2077.
[12] Lottoland (16 March 2016) The People Behind the Game – Lottery Demographics. Retrieved from: https://www.lottoland.co.uk/magazine/lottery-demographics.html.
[13] Nisbett, R. E., & Wilson, T. D. (1977). The halo effect: Evidence for unconscious alteration of judgments. Journal of personality and social psychology, 35(4), 250.
[14] Simon, J. (1998). An analysis of the distribution of combinations chosen by UK national lottery players. Journal of Risk and Uncertainty, 17(3), 243-277.
[15] Guryan, J., & Kearney, M. S. (2008). Gambling at lucky stores: Empirical evidence from state lottery sales. The American Economic Review, 98(1), 458-473.
[16] Edwards, S. (23 November 2016) Why do people make bad decisions? ‘Information Avoidance’ Can Explain. Devex. Retrieved from: https://www.devex.com/news/why-do-people-make-bad-decisions-information-avoidance-can-explain-89167?platform=hootsuite
[17] Golman, Russell and Hagmann, David and Loewenstein, George, Information Avoidance (February 17, 2016). Journal of Economic Literature, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2633226 or http://dx.doi.org/10.2139/ssrn.2633226
[18] Nickerson, R. S. (1998). Confirmation bias: A ubiquitous phenomenon in many guises. Review of general psychology, 2(2), 175.
[19] Wihbey, J. (27 July 2016) Who plays the lottery, and why: Updated collection of research. Journalist’s Resource. Retreived from: http://journalistsresource.org/studies/economics/personal-finance/research-review-lotteries-demographics
[20] Wihbey, J. (27 July 2016) Who plays the lottery, and why: Updated collection of research. Journalist’s Resource. Retreived from: http://journalistsresource.org/studies/economics/personal-finance/research-review-lotteries-demographics
[21] Haisley, E., Mostafa, R., & Loewenstein, G. (2008). Subjective relative income and lottery ticket purchases. Journal of Behavioral Decision Making, 21(3), 283-295.
[22] Mezulis, A. H., Abramson, L. Y., Hyde, J. S., & Hankin, B. L. (2004). Is there a universal positivity bias in attributions? A meta-analytic review of individual, developmental, and cultural differences in the self-serving attributional bias. Psychological bulletin, 130(5), 711.
[23] Ferster, C.B., & Skinner, B.F. Schedules of reinforcement. New York: Appleton-Century-Crofts; 1957.