Draggingtree Posted January 11, 2016 Share Posted January 11, 2016 The Real Value of a Powerball Ticket JANUARY 10, 2016 Matt McCaffrey Alex Tabarrok has a fun post calculating the monetary value of a Powerball ticket. He estimates that, as of the most recent drawing, each $2 ticket carries an expected monetary value of roughly $2.73. Superficially then, it’s worthwhile to buy one. However, Tabarrok also points out this is only true for a simple expected value calculation; after accounting for taxes and the possibility of shared prize, a ticket’s monetary value is actually substantially lower (around $.75), making it a poor investment. So why do people buy them? Are consumers hapless rubes throwing away their hard-earned money in exchange for nothing? Not necessarily. The reason is simple: there’s much more to valuation and choice than expected monetary value. In fact, I suspect almost no one buys a ticket with any such calculation in mind. Rather than a cold estimate of the probability of future returns, the Powerball actually illustrates the subjective theory of value. https://mises.org/blog/real-value-powerball-ticket Link to comment Share on other sites More sharing options...
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