Wouldn't it be nice to win the lottery? And since the multi-state Powerball lottery game has just changed to offer higher jackpots, including one that recently went over $330 million, could it be a good idea to buy a Powerball ticket today?
The answer is "it depends". Specifically, it depends upon the following factors:
- What are the odds of winning the jackpot?
- How much does a ticket cost?
- If you do win, how much of your prize will be taxed away from you?
Together, these three things, combined with the kind of math that an economist might do to calculate the environmental costs of a spill from an oil pipeline, will tell us how big the lottery jackpot needs to be to be worth the cost of the ticket to play!
And that's the math our tool today is here to do for you! Just enter the indicated data for the lottery game of your choice, and we'll calculate just how be the jackpot has to get to be worth the amount of money you might be willing to plunk down on a ticket.
Our default data is that for the new Powerball game, which was revised back on 15 January 2012 to double the price of a single ticket from $1 to $2, and which was also tweaked to increase the odds of winning.
Doing the math, we find that in order to fully justify the cost of a $2 lottery ticket, and to also compensate for the negative effect of having the jackpot get taxed at just the current top federal income tax rate of 35%, the Powerball lottery would have to exceed $539,149,262.
Will the Powerball jackpot ever exceed the more than half billion dollars it at least needs to be to be worth the price of its $2 ticket to play? It's possible, but the odds are such that the average jackpot paid out will be around the $175 million level, which means there's probably something else a lot better you can do with your $2 than play the new Powerball game!
Labels: probability, tool
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
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