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.
Spry, John A. and Crowley, Jocelyn E., "The Effects of Lottery Promotions, Credit Constraints, and the Stock Market on Daily New Jersey Lottery Sales" (2010). Economics Seminar Series. 2.