Product idea: guaranteed win lottery tickets

2008-07-24

in Daily updates, Economics

While thinking idly about ways to tactfully pass money to people, I had an idea. A company could sell lottery tickets (probably of the scratch-and-win sort) that are guaranteed to pay out specific amounts. You would buy them for the face value plus a service fee. They could be issued in denominations running from $10 or so up to thousands.

They would look like ordinary tickets, and could be redeemed at places that sell scratch-and-win tickets. The merchant would simply be compensated by the company. Even better, the company could buy guaranteed winner tickets from the normal ticket issuers. That way, they would be available in the same brands as tickets sold in normal shops, diminishing suspicion and allowing buyers to choose something suitable for the recipient.

This could be:

  1. A way to help a struggling friend of family member without making them feel guilty.
  2. A way to convince someone feeling down on their luck that things are turning around.
  3. Practical jokes of various sorts.
  4. Less benevolently, as a semi-covert means of exchanging money.

Could there be any other uses? Would people actually buy such a thing? Would lottery regulators ever permit them?

{ 12 comments… read them below or add one }

Anon July 24, 2008 at 6:11 pm

Would lottery regulators ever permit them?

The money laundering potential could be very serious, unless the companies that sell the tickets keep good records of who buys them.

Sarah July 24, 2008 at 6:57 pm

If the guarenteed win tickets look the same as the ordinary ones then what we’re talking about is fraud, not a new and clever device. Indeed, the use of ‘guarenteed tickets’ has already been a major problem with some forms of lottery tickets in Canada and has enabled some retailers to distinguish the winning tickets from the others and to collect the winnings whilst passing on only the losing tickets to the public.
I can see lots of problems with this scheme and essentially no benefits at all other than money laundering, given that the retailers and lottery company would take a big cut of what you paid (ie. a $300 price would likely only get you a $250 or $200 prize), thereby making it a surefire way to lose money.

Anon July 24, 2008 at 7:02 pm

The funny thing is that these guaranteed tickets would actually be a better buy than regular lottery tickets. You would always lose a bit of money, but you would almost certainly have more money after spending $X on these than you would spending $X on normal scratch-and-win tickets.

Milan July 24, 2008 at 7:15 pm

The funny thing is that these guaranteed tickets would actually be a better buy than regular lottery tickets.

Not quite. People only buy lottery tickets because they have asymmetrical preferences. They actually prefer a 1% shot at $100 to a 100% shot at $1. It’s even worse than that, actually, since about half of lottery takings usually fund things other than the prize. This is arguably irrational, since your last $1 is a lot more valuable to you than your 1,000,001th dollar. Even so, that is the preference people are revealing when they buy tickets.

Either that or they are irrationally optimistic or enjoy gambling for its own sake.

Milan July 24, 2008 at 7:16 pm

I do agree, however, that the statistics are a bit funny.

Milan July 24, 2008 at 7:24 pm

Sarah,

It seems incorrect to call the idea ‘fraud.’ If it were fraud, it would be occurring between the gift-giver and the recipient, and the only misrepresentation would be the odds of winning on the ticket. Arguably, this is akin to giving someone a nice piece of jewellery, but initially handing it to them in a toaster box.

The kind of retailer theft you describe has nothing to do with this idea. It’s a straightforward case of replacing one valuable object with a less valuable one and could be done with anything, not just lottery tickets. Having guaranteed win tickets available neither increases nor decreases the chances of it happening.

As long as the people selling the tickets collected identifying information, money laundering would not be a major concern. If they have false identification to buy the tickets with, they could just as well launder the money in other ways.

As for the size of cut the company would need to take, it really needn’t be large. It is entirely possible that the fee paid would be less than the difference in value between what a giver of an ordinary gift thinks it is worth and what the recipient would pay for it. (Deadweight Christmas situation)

. July 24, 2008 at 7:41 pm

Say you’re standing on a football field. You’re blindfolded and holding a pin. A friend has released an ant on the field. Your chance of piercing that ant with your pin is about the same as winning a Lotto 6/49 jackpot. One in 14 million. Not exactly a sure bet.

If you want to win big, consider taking that $10 a week you might spend on lottery tickets and investing it. After 35 years, you will be guaranteed $100,314.56 – if you get an eight per cent return on your investment. With a 10 per cent return, your weekly $10 would be worth a guaranteed $166,742.59. Make it $12 a week and at 10 per cent, you’ve squirrelled away $200,091.10 after 35 years. Again, guaranteed.

Sarah July 25, 2008 at 1:13 am

Provided that the guarenteed win tickets and the ordinary tickets look the same then the idea is essentially fraudulent because people will confuse two very different products. People’s decision to buy lottery tickets seems to be a sort of irrational, emotive thing & it seems likely that your ‘friend’ will buy more tickets if you give them the erroneous impression that they have won by chance. Further, this may deceive their acquaintances and any bystanders, thus giving the impression that the chances of winning are higher than is actually the case (probability would tell them otherwise, but it seems not to motivate people).
Unless the difference between the normal and guarenteed-win tickets is clear to everyone, it seems likely that people’s perceptions and their future behaviour will be distorted thereby causing foolish people (which is basically anyone who thinks lottery tickets are a reasonable way to invest money) to waste more cash than they otherwise would.
I think the money laundering concern remains whether or not personal details are collected. Although there are other options for laundering large sums (eg. currency exchange) the very large number of places which sell lottery tickets and relatively poor security (eg. minimally trained staff & no video cameras) would make it awkward to track and arrest people.

Milan July 25, 2008 at 8:49 am

the very large number of places which sell lottery tickets and relatively poor security (eg. minimally trained staff & no video cameras) would make it awkward to track and arrest people.

The guaranteed tickets would not be for sale in ordinary shops, but only from a single business in a much smaller number of venues. It could be like the shops that buy and sell gold and silver coins: requiring identification from buyers and sellers to avoid laundering schemes.

Milan July 25, 2008 at 8:54 am

The issue you raise about probabilities is a valid one.

People are much more likely to understand their odds of winning in relation to their own experiences than in relation to abstract figures.

ToryC July 25, 2008 at 10:15 am

Arguably, this is akin to giving someone a nice piece of jewellery, but initially handing it to them in a toaster box.

This analogy is misleading. When the recipient of the diamond-in-a-toaster-box actually opens it, they will know immediately that you spent a lot. When they scratch the ticket, they are meant to still believe that you only spent a couple of dollars on it.

. March 30, 2009 at 1:28 pm

Sunday, March 29, 2009
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