NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

State Lotteries and Consumer Behavior

Melissa Schettini Kearney

NBER Working Paper No. 9330
Issued in November 2002
NBER Program(s):   CH

Despite considerable controversy surrounding the use of state lotteries as a means of public finance, little is known about their consumer consequences. This project investigates two central questions about lotteries. First, do state lotteries primarily crowd out other forms of gambling, or do they crowd out non-gambling consumption? Second, does consumer demand for lottery games respond to expected returns, as maximizing behavior predicts, or do consumers appear to be misinformed about the risks and returns of lottery gambles? Analyses of multiple sources of micro-level gambling data demonstrate that lottery spending does not substitute for other forms of gambling. Household consumption data suggest that household lottery gambling crowds out approximately $38 per month, or two percent, of other household consumption, with larger proportional reductions among low-income households. Demand for lottery products responds positively to the expected value of the gamble, controlling for other moments of the gamble and product characteristics; this suggests that consumers of lottery products are not simply uninformed, but are perhaps making fully-informed purchases.

download in pdf format
   (319 K)

email paper

This paper is available as PDF (319 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9330

Published: Kearney, Melissa Schettini. "State Lotteries And Consumer Behavior," Journal of Public Economics, 2005, v89(11-12,Dec), 2269-2299. citation courtesy of

Users who downloaded this paper also downloaded these:
Kearney w11234 The Economic Winners and Losers of Legalized Gambling
Clotfelter and Cook w2928 The Demand for Lottery Products
Guryan and Kearney w14742 Is Lottery Gambling Addictive?
Cook and Clotfelter w3766 The Peculiar Scale Economies of Lotto
Guryan and Kearney w11287 Lucky Stores, Gambling, and Addiction: Empirical Evidence from State Lottery Sales
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us