America is in a fervor over the paucity of Powerball jackpots, which has resulted in a record $1.5 billion prize at stake. Even those who know the astronomical odds of winning have begun to join in the craze.
The statistics behind winning any of the nine Powerball payouts are fairly simple, with the least likely option being a 1 in 292.2 million chance of selecting all five white balls (ranging from numbers 1-69, without replacement) and the red Powerball (ranging from numbers 1-26). Other positive payouts can occur by matching combinations of correct numbers, ranging from a $1 million prize for matching all five white balls down to $4 for getting the Powerball correct.
Oftentimes, lotteries have been called the “poor man’s tax”. To be sure, people who play the lottery are disproportionately low-income individuals; multiple reasons for this exist, including that the utility gained from buying a lotto ticket in exchange for the fantasy of a better life far exceeds the $2 cost. Another reason that extends to why even higher-income people and those who know the dismal odds better than the average person – statisticians and economists – are getting in on the action for this round. This is the principle of loss aversion, which states that people tend to strongly prefer avoiding losses versus acquiring gains; a person is likely to be upset about losing $5, even if they pick up a $10 bill from the ground shortly after. In other words, the statisticians and economists are joining their office pools or venturing out to figure out how to work a lotto machine for the first time because the potential loss of “missing out” of the chance to score big far outweighs the cost of a ticket.
As long as you play the Powerball for a quick, $2 thrill that maximizes your utility, go ahead. Given the billion-dollar prize, I might just buy my first lottery ticket before the upcoming Wednesday drawing.