Gambling on Lotto Numbers: Testing for Substitutability or Complementarity Using Semi-Weekly...

The article examines fluctuations in the volume of Lotto sales and of fixed-odds betting on the Lotto draw to determine whether these two products are substitutes or complements. Lotto is a parimutual game offered by state lotteries. It is characterized by large maximum prizes and low probabilities of winning. Being a parimutual game, prizes are unknown at the time of ticket purchase and depend on the numbers chosen by all players. Fixed-odds betting removes the uncertainty about the size of prizes and offers higher expected payout ratios than the underlying parimutual game. The empirical analysis conducted showed that larger Lotto sales also lead to larger Lucky Numbers sales. It is impossible to accurately predict the effect on the Irish Lotto game if the complementary Lucky Numbers game was outlawed as sought. Based on the evidence presented in this paper, however, the Irish National Lottery would gain little additional revenue if Lucky Numbers betting were removed from the market. Consequently, there seems little reason for the British government to continue in its refusal to permit betting on the outcome of the UK National Lottery.