TY  - JOUR
AU  - Knight,Brian G.
AU  - Schiff,Nathan
TI  - Spatial Competition and Cross-border Shopping: Evidence from State Lotteries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15713
PY  - 2010
Y2  - January 2010
UR  - http://www.nber.org/papers/w15713
L1  - http://www.nber.org/papers/w15713.pdf
N1  - Author contact info:
Brian G. Knight
Brown University
Department of Economics, Box B
64 Waterman Street
Providence, RI 02912
Tel: 401/863-1584
Fax: 401/863-1970
E-Mail: Brian_Knight@brown.edu

Nathan Schiff
Sauder School of Business
University of British Columbia
Vancouver, BC V6T 1Z2
E-Mail:  nathan.schiff@sauder.ubc.ca
AB  - 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.
ER  -