eli5 Rather than having 1 winner with the lottery with sometimes over 1 hundred million pounds, why not share that money out amongst many, many people?

233 views

Is there a reason that most of the time there is only 1 jackpot winner? When the winning money goes into the tens of millions I always think, why not just share the money out over lots of people and give say 10,000 here and 500,000 there. Wouldn’t this be better for the economy rather than having just 1 person have it all?

In: Economics

The lottery winner is paid by a part of the total lottery ticket sale profits. The more people buy tickets, the more money you get as a prize. People are notoriously bad at statistics and risk-reward assessment so one big prize attracts more buyers than may smaller prizes. People won’t pay for a small chance at some decent money, but will for a smaller chance at life changing money.

Like someone else said, people are attracted by the big reward. But there are things like premium bonds which basically give more people smaller rewards if that’s what you want.

That’s the point you have the chance of winning a lot but almost everyone is going to lose, that’s all revenue for them. The reason it’s so prevalent at least in America is because they donate a lot of money To a myriad of causes so they don’t follow one Political ideology

Would you spend $10 on a ticket that is guaranteed to give $4 prize and nothing else?

Lottery, if you reduce variation in results, boils down to that. I don’t think there are many people stupid enough to put money in to a game where each time you’re guaranteed to lose.

But if there’s a tiny chance of getting huge amount of money? Well that’s different.

Lotteries can only pay out what people pay in.

If 10 people play a lottery and each one pays $1 for a ticket, you can have one winner who gets $10 and nine losers who get nothing.

You could also have 10 people who get $1 each, but that would rather go against the point of a lottery int he first place if everyone just got their money back.

And that does not even go into the fact that the lottery itself is for profit, they do not give out all the money they take in, but keep some to pay the cost of printing tickets and their employees and stuff and some additional money to be profit.

The economy isn’t really that affected no matter how the winning are distributed. It is bad either way.

Lottery are in effect a regressive tax that mostly takes money from poorer people.

Poor people having more money would be good for the economy because they spend it all.

I’m a little confused. I’m not sure how lotteries work elsewhere, but the “education” lotteries where I live (where the profits help fund public education), they do already do this.

If you get a few numbers matching, you get a $ prize. The more numbers that match on a ticket, the more you win. So, for example, if you match all 6 numbers in MegaMillions, you get the jackpot (and it IS split amongst ALL tickets that match all 6). If you match 5 of the six (all five of the regular numbers but not the “mega ball”) then you win $1 million. So smaller amounts are already paid out to many, many people based on how many numbers they matched.

Maybe you’re asking why they don’t divide out the whole $20 million jackpot (what the base megamillions jackpot resets to after someone hits the jackpot) amongst all tickets that match any numbers, at every single drawing?

If so, that’s because it would bankrupt the system. They’d have to pay out $20 million twice a week, instead of being able to collect tickets sale revenue as the jackpot goes up s-l-o-w-l-y until the occasional times some ticket does finally match all and hit the jackpot.

Think of it this way: Right now the MegaMillions jackpot is $117 million.

The last time a jackpot was won was June 8, 2021.

There have been 10 drawings since then (every Tuesday and Friday). If they split the full $20 million amongst all tickets each time, they would have already paid out $200 million. By only paying out fixed amounts for any matches except a complete jackpot and slowly increasing the jackpot, even if somebody hits the jackpot today (Friday) they have collected $83 million more in revenue for education funding by using the current system. So I guess the simplest answer is that they don’t split out the whole jackpot each time because the purpose of the lottery is to generate revenue, not to thrill people with a cool windfall.

Back when I was a kid, there were big “sweepstakes” that I *think* did give out all the prize money, but they were used as advertising for products the sweepstakes sponsor was hawking (look up Publisher’s Clearinghouse Sweepstakes, that’s the one we always got mail flyer entries for). So the whole purpose there was to show off them giving people an amazing “lucky” windfall, to draw attention to the sponsor’s name in a big way.

Lotteries are not designed to be “good for the economy”.

It’s a *voluntary* tax used to fund government programs.

They sell $100 M in tickets. They take $40 M and use it to fund something (schools, parks, etc). They give $60 M to the ‘winner’ as an incentive to get people to volunteer to participate.

Most lotteries do have different winning tiers. For example, someone who matches 5 of 6 numbers might still be entitled to a substantial prize. However, by construction a “jackpot” is the least likely outcome and the biggest prize. For a 6-number lottery, it would be matching all 6 numbers.

Multiple people can win the jackpot in the same lottery drawing. This sometimes happens when the lottery goes a while without paying out, and the big prize pool drives media attention and “lottery mania.” Many more tickets are bought, and sometimes more than 1 wins the jackpot. In these cases, the co-winners usually split the jackpot.