TY  - JOUR
AU  - Kearney,Melissa Schettini
TI  - State Lotteries and Consumer Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9330
PY  - 2002
Y2  - November 2002
UR  - http://www.nber.org/papers/w9330
L1  - http://www.nber.org/papers/w9330.pdf
N1  - Author contact info:
Melissa Schettini Kearney
Department of Economics
University of Maryland
3105  Tydings Hall
College Park, MD 20742
Tel: 301/405-6202
E-Mail: kearney@econ.umd.edu
AB  - 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.
ER  -