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Combs, Kathryn L. & Crowley, Jocelyn Elise & Spry, John A. (2014). The Effect of New Jersey Lottery Promotions on Consumer Demand and State Profits. Eastern Economic Journal, 40(3), 326-348. Retrieved from https://doi.org/doi:10.7282/T3MC91SM

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The Effect of New Jersey Lottery Promotions on Consumer Demand and State Profits (2014)
Kathryn L. Combs, Jocelyn Elise Crowley, John A. Spry
Eastern Economic Journal 40(3): 326-348.
Link to published version
VersionAccepted Manuscript (AM)
AbstractWe estimate elasticities of demand for New Jersey’s Pick 3 and Pick 4 midday/evening numbers games by exploiting random price variation generated by episodic promotions for each game. These Pick 3 Green Ball and Pick 4 Red Ball promotions lower the price of a lottery ticket for an evening numbers game by increasing prize payments during the 28-day promotion periods. The own-price elasticities of demand for the evening Pick 3 and Pick 4 games are both approximately -0.5. During the promotions, the loss in profit margins outweighs the gain in sales because of this inelastic demand. However, the combined effects of lower evening Pick 3 profits and increased sales of complementary products boost lottery profits by $30,000 per day, or $840,000 during the 28 days of the Green Ball promotion, while the combined effects of lower evening Pick 4 profits and reduced sales of substitute products decrease lottery profits by $129,000 per day, or $3.61 million during the 28 days of the Red Ball promotion. If higher sales after the promotion are included, the total increase in profits potentially reaches $14.48 million under the Green Ball game, while the Red Ball promotion loses money for the lottery even considering its positive lagged effect.
Persistent URLhttps://doi.org/doi:10.7282/T3MC91SM
SubjectsLottery, Gambling, Price Elasticity, Policy Evaluation
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