In December, as I have done for several years now, I review what happened in Powerball and Mega Millions in the past year, and use math models to make some predictions about future behavior. The games became more similar in October 2017, when Mega Millions raised its price and changed its matrix. My outlook for 2018 is based on players responding much as they did when Powerball made similar changes in 2012. A key point from simulations is how broad is the range of “likely” outcomes- give or take half a billion in profit is about right!NASPL Insights December 2017
After January 2016, we saw sales for jackpots in the range $200 to $400 million significantly lower than before. My math models support estimating the effect of these changes on the development of big jackpots in the future. I estimate the likelihood of a jackpot reaching $1 billion in 2017 at about 10%, down from about 17% at the start of 2016. NASPL Insights December 2016
I used math models to explore how matrix changes in Powerball will likely increase sales (as we all want) and increase year-to-year variability (as nobody wants), and estimated the likelihood of a Powerball jackpot exceeding $1 billion in 2016 at about 17%. A few weeks after this publication appeared, that event did happen. As I remarked to some at the time, same odds as Russian Roulette (just saying). NASPL Insights December 2015
Pio is an economist educated in the US Ivy League, who serves his native island of Zoa in many capacities, including Director of the Lottery. I was introduced to him at a meeting of economists in Seattle, and he opened my eyes to a factor that drives our year-on-year increases in Instant game sales. Economists agree: if money is getting cheaper, it takes more of it to express the same value, year after year. NASPL Insights June 2015
NASPL Insights December 2014, I assessed the behavior of the Powerball and Mega Millions games in the eleven months since California joined the Powerball game. I found that while sales at jackpots below $100 million had remained fairly steady, the sales response to jackpots approaching $300 million was less than half what it had been during the “base period” between Feb 2012 (when Powerball raised its price to $2) and April 2013 (when California joined). I went on to project the probability distribution for jackpots greater than $300 million in the coming year. The difference between the games was stark: Powerball was more likely than not to have three or more such events, while Mega Millions was more likely than not to have no more than one.
Using math modeling techniques including thousand-year models, I forecast the changes in behavior of the Mega Millions game to be expected from structural changes that took effect in October 2013. This article appeared in NASPL Insights February 2014.
In Washington State, the lottery shares its sales forecasts with state economists, who are accustomed to forecasting all sorts of revenue of the basis of economic and population variables. Taking their lead, I found that I could account for a long, quarter-by-quarter history of instant game consumption on the basis of population, cost of living, unemployment, and so on- without taking into account anything that the lottery was doing. With forecasts of these driving variables, it is possible to make quarter-by-quarter forecasts of instant game consumption that are as accurate as other revenue forecasts. I apologize for the tight academic style of this article; I was still transitioning from hard science! NASPL Insights October 2011