Why a Mega Millions Ticket is a Good Investment

excerpt The Monkeycage

As I understand it, the expected payoff from a lottery ticket is simply the probability that you win times the value of jackpot. According to CNN, the chances of winning the lottery are 1 in 175 million, and the jackpot is $640 million. Let’s even posit that you lose half of the present value of the jackpot to taxes and the fact that you probably don’t actually get all of the money now, we’re still looking at a 1 in 175 million chance of winning $320 million dollars. By my calculation, that means the expected value of a lottery ticket is $1.83. Since a lottery ticket only costs $1, that would suggest that on this particular day, a Mega Millions lottery ticket is a good investment.

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