I value having the chance
The very slim hope of winning a big prize is enough for millions of people around the world to pay a small sum to play the lottery each week.
But is it rational? Particularly given the tiny odds of actually winning the big prize?
If the experience of playing the lottery is pleasurable for those playing, they do get something – joy – in return for paying the price of entry, even if they don’t win. And if the ticket cost does not cause financial harm, it arguably doesn’t hurt to spend a small amount of discretionary income (spare money) on the lottery.
But given the low odds, isn’t it akin to throwing money away? Why bother?
What are the odds? How unlikely we are to win
Part of the answer might be provided by academics who study the way people make decisions under uncertain circumstances.
Prospect theory, developed by Nobel Prize recipient Daniel Kahneman and long-time collaborator Amos Tversky, explains how people “misperceive” probabilities of extreme unlikely events.
Put simply, it is difficult to understand the difference between the unlikely and the practically impossible. Many people buy lottery tickets week after week, just as many children are convinced they will become pop stars or professional footballers.
So, people might be more willing to pay EUR1 for almost certainly not winning EUR1 million than to have a one-in-ten chance of winning EUR10.
In addition, prominent stories about lottery winners in the media (or of an elusive friend-of-a-friend-of-a-friend who won) might encourage the view that winning is more likely than it really is.
Dreams come true?
In any case, experiments detailed here suggest that winning the lottery might not be as life changing as many expect. After all, there are many things money can’t buy. Though that’s a problem we’d be happy to test.