Suppose that 400,000 Cash WinFall tickets were sold for the Jan 29th drawing. As

Question

Suppose that 400,000 Cash WinFall tickets were sold for the Jan 29th drawing. Assume all 400,000 tickets were printed by the lottery machine to randomly pick the numbers on each betting slip with equal probability. The Jan 29th drawing’s jackpot is announced to be $1,000,000 ($480,000 from new sales + $520,000 rolled over from the last drawing. Treating the $2 free betting as the equivalent dollar payoff, compute the expected payoff of your single $2 ticket. Is it worth investing in the lottery given the expected payoff? (Hint: you need to use the information that the total number of tickets sold for this game is 400,000 to answer this question correctly).

Explanation / Answer

Expected Net payoff per ticked = 1000000/400000 - 2 =2.5-2 = 0.5 Dollars

It is worth investing in the lottery with this payoff

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