Spatial Competition and Cross-border Shopping: Evidence from State Lotteries

Brian G. Knight, Nathan Schiff

NBER Working Paper No. 15713
Issued in January 2010
NBER Program(s):   PE   POL

This paper investigates competition between jurisdictions in the context of cross-border shopping for state lottery tickets. We first develop a simple theoretical model in which consumers choose between state lotteries and face a trade-off between travel costs and the price of a fair gamble, which is declining in the size of the jackpot and the odds of winning. Given this trade-off, the model predicts that per-resident sales should be more responsive to prices in small states with densely populated borders, relative to large states with sparsely populated borders. Our empirical analysis focuses on the multi-state games of Powerball and Mega Millions, and the identification strategy is based upon high-frequency variation in prices due to the rollover feature of lottery jackpots. The empirical results support the predictions of the model. The magnitude of these effects is large, suggesting that states do face competitive pressures from neighboring lotteries, but the effects vary significantly across states.

download in pdf format
   (369 K)

email paper

This paper is available as PDF (369 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15713

Published: Brian Knight & Nathan Schiff, 2012. "Spatial Competition and Cross-Border Shopping: Evidence from State Lotteries," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 199-229, November. citation courtesy of

Users who downloaded this paper also downloaded these:
Mitchener and Wheelock w15710 Does the Structure of Banking Markets Affect Economic Growth? Evidence from U.S. State Banking Markets
Coate and Knight w14857 Government Form and Public Spending: Theory and Evidence from U.S. Municipalities
Knight w17469 State Gun Policy and Cross-State Externalities: Evidence from Crime Gun Tracing
Syverson w15712 What Determines Productivity?
Syverson w12231 Prices, Spatial Competition, and Heterogenous Producers: An Empirical Test
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us