Lotteries are reverse solidarity: a lot of people pay to make 1 person rich.
Lotteries are my prime example when I want to highlight that humans don't act rationally
Lotteries are my prime example when I want to highlight that humans don't act rationally
What if $5 per week for the rest of their life doesn't impact an individual's standard of living, but $10 million would drastically improve it?
Does it then make (more) sense to participate?
But if you get some other value out of it you place at least $5/wk utility on, sure. Maybe you get more utility out if it than a movie a month, or whatever.
Already maxing my ROTH and 401K so I figure it's like $80 a year well spent to entertain the phantasy.
I don't think most people even consider the odds when playing the lottery.
Insurance on the face of it is irrational -- insurance companies make money, therefore buying insurance is paying a premium above what the expected reimbursement is over the lifetime of the insurance. It's a reverse lottery; the expected outlays exceed the expected returns.
What you pay the premium for in insurance is to reduce downside variance.
What you pay the premium for in a lottery is to increase the upside variance.
OTOH, people pay for the dream of winning the lottery, which has some value, adicts withstanding.