Document Type

Article

Publication Date

3-29-2010

Abstract

This paper estimates the price elasticity of demand for daily Pick 3 and Pick 4 lottery games using random price variation generated by the New Jersey Lottery’s evening Pick 3 Green Ball promotion and Pick 4 Red Ball promotion. These promotions lower the price of a lottery ticket for an evening daily numbers game by increasing prize payments during the promotion period. The own-price elasticity of demand for evening Pick 3 is -0.50, while the own-price elasticity of demand for evening Pick 4 is -0.57. This inelastic demand implies that the loss in margin outweighs the gain in sales during the promotion for the promoted lottery game. Midday Pick 3 and Pick 4 lottery sales increase because of the price promotions for their evening counterparts. The lottery promotions also moderately increase midday daily game sales and Pick 3 and Pick 4 sales temporarily after the promotions end. Our findings that sales are significantly higher on Fridays and at the start of a month are consistent with daily lottery players facing credit constraints.

Included in

Economics Commons

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