Can We Stretch Elasticity? The Tradeoffs of Prize Expense, Sales, and Customer Base

My economist friend M. pointed out some time ago that the way lotteries build instant tickets embodies a doctrine about pricing. The doctrine expressed by most lotteries might be called “best deals for our most committed customers”- that is, the players who are willing to spend $20 per ticket get our most generous payouts. This doctrine¬† tends to concentrate the business on a small and very avid player base. Most lotteries claim to want something different- a broad base of players, none of whom plays excessively. A pricing doctrine better suited to producing this result is called “pricing for penetration”. Have you ever heard of this in the lottery context? Neither had I when I published this article in¬†NASPL Insights August 2013

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