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Way up the cost: Will the increased price of National Lottery tickets affect sales?

The following blog is based on a short article that I wrote for Nottingham Trent University’s Expert Opinion column published earlier this year (January 29, 2013) and is a written version of many of the comments I made in national and local  BBC radio interviews yesterday.

This week Camelot Plc increased  the price of a Lotto ticket from £1 to £2 – but will this 100% price increase have any effect on whether people play the bi-weekly game? My own view is that although there may be a dip in overall sales when the price of the tickets first increases, over time, sales are likely to return to pre-price increase levels.

The price of buying a lottery ticket is just one of many inter-connected structural characteristics that help determine whether potential players will play the lottery. Other structural characteristics in gambling activities include the size of the jackpot, the number of smaller prizes, the probability of winning the jackpot and / or smaller prizes, the speed of the game, how quickly players receive their winnings, the ease of playing the game, whether the game is chance-based or requires some skill, the number of chances to gamble on a single event, etc.

The chance of winning the bi-weekly lottery is an incredible one in 14 million. But is playing Lotto a tribute to public innumeracy and totally irrational? Not necessarily. Lotto offers a low-cost chance of winning a very large life-changing amount of money. Many psychologists would argue that playing Lotto is entirely rational behaviour given the small cost involved. Basically, it’s a small cost for millions of people buying hope. More importantly, we know that most players don’t think about the actual probability of winning but concentrate on the amount that could be won (i.e., the jackpot size). Players may also rationalize that the cost of a ticket is still cheaper than buying a pint of lager in a pub or a coffee atStarbucks.

Jackpot size is one of the most important factors in whether people play the lotto. The fact that the ticket price is doubling doesn’t take away the fact that there will still be an enormous jackpot. Additionally, to soften the blow of the increased price, the amount that can be won for matching three numbers will increase from £10 to £25. This again is likely to help sales maintenance. And if people do feel that £2 is too much for a single ticket, there are plenty of other games in the national lottery portfolio to choose from.

Another factor that is important in lottery profitability for the operators is that we tend to overestimate positive outcomes and underestimate negative ones. If someone is told they have a one in 14 million chance of being killed that day they would hardly give it a second thought because the chances are tiny. Given the same probability of winning Lotto people suddenly become over-optimistic (“It could be you!”).

The media also plays a part. By providing widespread coverage for the few huge winners, it helps us forget the millions of people who lost! Finally, for regular players who choose the same numbers every week, they become ‘entrapped’ fearing that the one week they don’t play will be the week their numbers will come up. Players who have picked the same numbers for years are still likely to play despite the price increase for the same reason.

The bottom line is that Camelot will have done lots of market research to determine whether players will be prepared to pay more money to play Lotto. Major decisions about pricing are key to future success and increased profits. If people stop playing Lotto in their masses, a return to a lower price will be inevitable. However, my guess is that most current Lotto players will continue to play a game as the thought of winning millions of pounds outweighs the price increase.

Dr Mark Griffiths, Professor of Gambling Studies, International Gaming Research Unit, Nottingham Trent University, Nottingham, UK

Further reading

Arkes, H.R. & Blumer, C. (1985). The psychology of sunk cost.  Organizational Behavior and Human Decision Processes, 35, 124-140.

Griffiths, M.D. (1997). The National Lottery and instant scratchcards: A psychological perspective. The Psychologist: The Bulletin of the British Psychological Society, 10, 26-29.

Griffiths, M.D. (1997). Selling hope: The psychology of the National Lottery. Psychology Review, 4, 26-30..

Griffiths, M.D. (2008). Problem gambling and European lotteries. In M. Viren (Ed.), Gaming in New Market Environment. pp. 126-159. New York: Macmillan Palgrave.

Griffiths, M.D. (2010). The effect of winning large jackpots on human behaviour. Casino and Gaming International, 6(4), 77-80.

Griffiths, M.D. (2011). Gambling, luck and superstition: A brief psychological overview. Casino and Gaming International, 7(2), 75-80.

Griffiths, M.D. & Wood, R.T.A. (2001). The psychology of lottery gambling. International Gambling Studies, 1, 27-44.

Kahneman, D. & Tversky, A. (1973). Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5, 207-233.

Langer, E.J. (1975). The illusion of control. Journal of Personality and Social Psychology, 32, 311-328.

Langer, E.J. & Roth, J. (1975). The effect of sequence outcome in a chance task on the illusion of control. Journal of Personality and Social Psychology, 32, 951-955.

Tversky, A. & Kahneman, D. (1971). Belief in the law of small numbers. Psychological Bulletin, 76, 105-110.

Walker, M.B. (1992). The Psychology of Gambling. Pergamon, Oxford.

Wagenaar, W. (1988). Paradoxes of Gambling Behaviour. Erlbaum, London.

Wood, R.T.A. & Griffiths, M.D. (2004). Adolescent lottery and scratchcard players: Do their attitudes influence their gambling behaviour? Journal of Adolescence, 27, 467-475.

Play’s cool? Is the type of game played important in the development of gambling addictions?

Earlier today, I (and my research colleague Michael Auer) had a paper published in the journal Frontiers in Psychology arguing that the type of game that people gamble on is irrelevant in the acquisition, development, and maintenance of pathological gambling. We noted that anyone coming into the gambling studies field from a psychological perspective would probably conclude from reading the literature that problem and pathological gambling is associated with particular game types. More specifically, there appears to be a line of thinking in the gambling studies field that casino-type games (and particularly slot machines) are more likely to be associated with problem gambling than lottery-type games.

We argued that the most important factors along with individual susceptibility and risk factors of the individual gambler are the structural characteristics relating to the speed and frequency of the game (and more specifically event frequency, bet frequency, event duration and payout interval) rather than the type of game. Event frequency refers to the number of events that are available for betting and gambling within any given time period. For example, a lottery draw may occur once a week but a slot machine may allow 15 chances to gamble inside one minute. In this example, slot machine gambling has a higher event frequency than lottery gambling. Bet frequency refers to the number of bets or gambles placed in any given time period. Using lottery playing as example, Dr. Jonathan Parke and I noted in a 2007 book chapter on structural characteristics, that multiple tickets (e.g., 10 tickets) can usually be purchased as frequently as desired before any single lottery draw. In this instance, bet frequency would be equal to 10 but event frequency would be equal to 1. Therefore, event frequency can often be much lower than bet frequency and it is possible for players to spend more than they can afford even with a low event frequency.

Dr. Parke and I have stated that further empirical research is needed into the relationship between event frequency and bet frequency. This is because researchers often assume that event frequency and bet frequency have a strong relationship (i.e., the higher number of betting/gambling events – the higher the frequency of betting/gambling). However, this may not be the case.

Another important gaming parameter is event duration. This refers to how fast the event in question is (e.g., a reel spin on a slot machine might last three seconds). Here, it is important to note that duration of the betting/gambling event is different from event frequency (although they may be inextricably linked in so much as the length of a betting event will obviously limit the frequency with which they can take place). Again, Dr Parke and I noted that a betting event lasting two hours (e.g., a soccer game) could not have an event frequency greater than one in any 2-hour period but could have a betting frequency of over 100 with the advent of in-play betting.

In-play betting and gambling (which I examined in a previous blog) refers to the wagering on an event that has started but has not yet finished. This means gamblers can continue to bet on an event (e.g., a soccer or cricket match) and perhaps more importantly, adapt their bets according to how the event is progressing.  For instance, in the UK, during the playing of almost any soccer match, a gambler can bet on everything from who is going to score the first goal, what the score will be after 30 minutes of play, how many yellow cards will be given during the game and/or in what minute of the second half will the first free kick be awarded. What I argued in a previous blog is that ‘in-play’ gambling activities have taken what was traditionally a discontinuous form of gambling – where a gambler made one bet every weekend on the result of the game – to one where a player can gamble continuously again and again. In short, the same game has been turned from what was a low event frequency gambling activity into a potentially high frequency one (and gone from an activity that had little association with problem gambling to one where problem gambling is far more likely among excessive in-play gamblers).

Another important (and related) structural characteristic is payout interval. This is the time between the end of the betting event (i.e., the outcome of the gamble) and the winning payment (if there is one). The frequency of playing when linked with two other factors – the result of the gamble (win or loss) and the actual time until winnings are received – exploits the psychological principles of learning. This process of operant conditioning conditions habits by rewarding (i.e., reinforcing) behaviour (i.e., through presentation of a reward such as money). To produce high rates of response, those schedules which present rewards intermittently (random and variable ratio schedules) have shown to be most effective. Since a number of gambling activities (most notable slot machines) operate on random and variable ratio schedules it is unsurprising that excessive gambling can occur.

To highlight the irrelevance of game type, consider the following two examples that demonstrate that it is the structural characteristics rather than the game type that is critical in the acquisition, development and maintenance of problem and pathological gambling for those who are vulnerable and/or susceptible. A “safe” slot machine could be designed in which no-one would ever develop a gambling problem. The simplest way to do this would be to ensure that whoever was playing the machine could not press the ‘play button’ or pull the lever more than once a week. An enforced structural characteristic of an event frequency of once a week would almost guarantee that players could not develop a gambling problem. Alternatively, a problematic form of lottery could be designed where instead of the draw taking place weekly, bi-weekly or daily, it would be designed to take place once every few minutes. Such an example is not hypothetical and resembles lottery games that already exist in the form of rapid-draw lottery games like keno.

The general rule is that the higher the event frequency, the more likely it is that the gambling activity will cause problems for the individual (particularly if the individual is susceptible and vulnerable). Problem and pathological gambling are essentially about rewards, and the speed and frequency of those rewards. Almost any game could be designed to either have high event frequencies or low event frequencies. Therefore, the more potential rewards there are, the more problematic and addictive an activity is likely to be and this is irrespective of game type as games such as diverse as lotteries and slot machines could have identical event frequencies and event durations.

Dr Mark Griffiths, Professor of Gambling Studies, International Gaming Research Unit, Nottingham Trent University, Nottingham, UK

Further reading

Griffiths, M.D. (1993). Fruit machine gambling: The importance of structural characteristics. Journal of Gambling Studies, 9, 101-120.

Griffiths, M.D. (1994). The role of cognitive bias and skill in fruit machine gambling. British Journal of Psychology, 85, 351-369.

Griffiths, M.D. (1999). The psychology of the near miss (revisited): A comment on Delfabbro and Winefield. British Journal of Psychology, 90, 441-445.

Griffiths, M.D. (2008). Impact of high stake, high prize gaming machines on problem gaming. Birmingham: Gambling Commission.

Griffiths, M.D. (2012). Mind games (A brief psychosocial overview of in-play betting. i-Gaming Business Affiliate, June/July, 44.

Griffiths, M.D. & Auer, M. (2013). The irrelevancy of game-type in the acquisition, development and maintenance of problem gambling. Frontiers in Psychology, 3, 621. doi: 10.3389/fpsyg.2012.00621.

Griffiths, M.D. & Wood, R.T.A. (2001). The psychology of lottery gambling. International Gambling Studies, 1, 27-44.

Meyer, G., Hayer, T. & Griffiths, M.D. (2009). Problem Gaming in Europe: Challenges, Prevention, and Interventions. New York: Springer.

Parke, J. & Griffiths, M.D. (2006). The psychology of the fruit machine: The role of structural characteristics (revisited). International Journal of Mental Health and Addiction, 4, 151-179.

Parke, J. & Griffiths, M.D. (2007). The role of structural characteristics in gambling.  In G. Smith, D. Hodgins & R. Williams (Eds.), Research and Measurement Issues in Gambling Studies. pp.211-243. New York: Elsevier.

Everyone’s a winner? The role of cognitive biases in lottery playing

Earlier this week, I was interviewed by the Metro newspaper about the psychology of playing the National Lottery.  One reader of the article had a somewhat sarcastic dig at me:

“I happened to glance through the Metro today, whilst waiting for an appointment, and noticed a feature on lotteries. It actually draws on Prof Mark Griffiths from Nottingham Trent University, to deliver this shocking statement ‘Prof Griffiths believes lotteries are a form of gambling’”

Out of context, the statement does sound somewhat banal. However, the point that I was making to the journalist was that many lottery players don’t believe that buying a lottery ticket is really gambling. Studies have shown that if you ask “pure lottery players” (i.e., those people who only play the lottery and don’t engage in any other form of gambling) if they gamble, a large proportion typically answer that they don’t. Lottery players often refer to their behaviour as nothing more than a ‘harmless flutter’. Given that very few people develop problems from weekly or bi-weekly lotteries is a fair and accurate comment. Other lottery players will claim that the activity is not really a form of gambling because the money goes to good causes (which while partly true) doesn’t negate the fact that playing the lottery is a form of gambling.

Over the years I have written many papers and articles on lottery play. In today’s blog I briefly examine some of the cognitive biases and heuristics that have been applied to lottery gambling (excluding the psychology of the near miss that I examined in a previous blog). Heuristics are usually defined as ‘rules-of-thumb’ (i.e. simple ‘if-then’ rules or norms). There are many heuristics (e.g., the illusion of control, the availability bias, the sunk cost bias, the representativeness bias, etc.) that may help explain why lotteries are so appealing to the general public – beyond the basic reason that playing the lottery provides the chance to win a life-changing amount of money (millions of pounds) for a low cost (typically £1). Although the following heuristics are not an exhaustive list, they do contain those cognitive biases and heuristics that are probably most salient to the psychology of lottery gambling:

Illusion of control: Ellen Langer, a very well know American psychologist at Harvard University, defined the illusion of control is an expectancy of success higher than the objective probability would warrant. In essence, her basic assumption was that in some chance settings (e.g., buying a lottery ticket), those conditions that involved factors of choice, involvement, familiarity and/or competition stimulate the illusion of control to produce skill orientations. These observations have been confirmed in both laboratory and natural setting based experiments. For instance, Langer’s seminal 1970s experiments showed that participants would sell previously bought lottery tickets for a higher price if they had picked it themselves as opposed to having it ‘assigned’ by someone else.

Flexible attributions: Flexible attributions are cognitive distortions in which gamblers attribute their successes as due to their own skill and failures as due to some external influence. Research by US psychologixt Thomas Gilovich (Cornell University) demonstrated that gamblers transform their losses into ‘near wins’ and spend far more time discussing their losses and discounting them while bolstering their wins. Professor Gilovich also showed that gamblers display hindsight bias (i.e. they are not surprised by the outcome of a gamble and report they predicted it after the event has happened).

Representativeness bias: The classic work on representativeness bias – by Israeli-US psychologists Daniel Kahneman and Amos Tversky – applies to random samples of data and is where people expect to find a representative relationship between samples drawn from the population and the population itself. For instance, when subjects are asked to create a random sequence of imaginary coin tosses they tend to produce sequences where the proportion of ‘tails’ in a short segment is closer to 0.5 than chance would predict. This particular mechanism may well explain the ‘gambler’s fallacy’, (i.e., the expectation that the probability of winning will increase with the length of an ongoing run of losses).

Availability bias: The availability bias occurs when a person evaluating the probability of a chance event makes the judgment in terms of the ease with which relevant instances come to mind. With regards to the lotteries, winners are often highly publicised. These both give the idea that wins are regular and commonplace when in fact they are rare. A vividly presented case study or example can make a lasting impression.

Sunk cost bias: Another factor that may be important in why lotteries have been so financially successful is the sunk cost bias (also known as entrapment). Entrapment refers to a commitment to a goal that has not yet been reached. The basic premise is to get the person committed to the cause or product as soon as possible. Once a commitment is made, the nature of thought changes. To the converted (in this case the lottery ticket buyer), careful and considered analysis of the situation is likely to be minimal. Lotteries have one great advantage over many other forms of gambling in that many people pick exactly the same numbers each week. In the UK, a newspaper survey reported that 67% of people choose the same numbers each week. Of this figure, the survey reported that 30% chose their regular numbers after an initial random selection and 37% chose the same numbers each week based on birthday dates, house numbers, favourite numbers, etc. However, no details were given about demography of the participants or the sample size.

By picking the same numbers the person may become ‘entrapped’. Each week the player thinks they are coming closer to winning. The winning day is impossible to predict but should the lottery player decide to stop and cut their losses, they are faced with the prospect that the very next week their numbers might come up. The player is thus entrapped and the entrapment become greater as the weeks go by. According to Australian psychologist Dr Michael Walker, people can reach a point where holidays cannot be taken unless arrangements are made for the weekly ticket to be completed and entered. The ‘entrapment’ process is not only known as the ‘sunk cost bias’ but is also another ‘foot-in-the-door’ technique.

These heuristics and biases give some insight into why gamblers do not learn from their past losses and help to explain supposedly ‘irrational’ behaviour. However, heuristics and biases have no predictive value. It is almost impossible to know which heuristic will be applied in a given situation and it is quite possible for the same person to use a different heuristic in the same situation on different occasions.

Dr Mark Griffiths, Professor of Gambling Studies, International Gaming Research Unit, Nottingham Trent University, Nottingham, UK

Further reading

Arkes, H.R. & Blumer, C. (1985). The psychology of sunk cost.  Organizational Behavior and Human Decision Processes, 35, 124-140.

Griffiths, M.D. (1997). The National Lottery and instant scratchcards: A psychological perspective. The Psychologist: The Bulletin of the British Psychological Society, 10, 26-29.

Griffiths, M.D. (1997). Selling hope: The psychology of the National Lottery. Psychology Review, 4, 26-30.

Griffiths, M.D. (2008). Problem gambling and European lotteries. In M. Viren (Ed.), Gaming in New Market Environment. pp. 126-159. New York: Macmillan Palgrave.

Griffiths, M.D. & Wood, R.T.A. (2001). The psychology of lottery gambling. International Gambling Studies, 1, 27-44.

Kahneman, D. & Tversky, A. (1973). Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5, 207-233.

Langer, E.J. (1975). The illusion of control. Journal of Personality and Social Psychology, 32, 311-328.

Langer, E.J. & Roth, J. (1975). The effect of sequence outcome in a chance task on the illusion of control. Journal of Personality and Social Psychology, 32, 951-955.

Tversky, A. & Kahneman, D. (1971). Belief in the law of small numbers. Psychological Bulletin, 76, 105-110.

Walker, M.B. (1992). The Psychology of Gambling. Pergamon, Oxford.

Wagenaar, W. (1988). Paradoxes of Gambling Behaviour. Erlbaum, London.

Wood, R.T.A. & Griffiths, M.D. (2004). Adolescent lottery and scratchcard players: Do their attitudes influence their gambling behaviour? Journal of Adolescence, 27, 467-475.

Against all odds: The psychology of lottery gambling

Playing on national lottery games is one of the most popular forms of gambling worldwide and they are also a growing in popularity in their many online incarnations. But what is the psychological appeal of an activity where the odds of winning huge jackpot prizes are usually infinitesimal? For instance, the odds of winning the EuroMillions lottery are 76 million to one. I often joke that you would get better odds of Elvis Presley landing on the moon on the back of the Loch Ness Monster!

Most of us have probably wondered what we would do if we ever won the lottery, but the sad fact is that almost all of us won’t ever win even if we play the lottery every week for the rest of our lives. Conventional wisdom says that big jackpot lottery winners should hopefully look forward to a long life of everlasting happiness. However, research studies have found that lottery winners are euphoric very briefly before they settle back to their ‘normal’ level of happiness or unhappiness. This is because happiness is relative. There is a popular belief by some psychologists that in the long run, winning on the lottery will not make you happy. Researchers who study happiness say that everyone has a certain level of happiness that stays relatively constant but can be changed by particular events that make you happy or sad.

For instance, if you are a generally happy person and a close relative dies, research shows that after a few months or so, you will go back to the same happiness level you were previously. However, this works the other way too. Say you are a person who is not very happy in your day-to-day life. You could win the lottery and would probably be happy for a couple of months, but then you would ‘level out’ and go back at your normal unhappiness level.

On a more practical day-to-day level, most of the research on lottery winners has shown that their lives are much better as a result of their life-changing wins but there is also a significant minority of winners who find other problems occur as a result of their instant wealth. They may give up their jobs and move to a more luxurious house in another area. This can lead to a loss of close friends from both the local neighbourhood and from their workplace. There can also be family tensions and arguments over the money and there is always the chance that winners will be bombarded with requests for money from every kind of cause or charity. However, despite potential problems, most of the psychological research (perhaps unsurprisingly) indicates that winners are glad they won.

There are also those groups of people who will view the acquisition of instant wealth as “undeserved”. Basically, when people win the lottery, other people treat them differently, even if the winners don’t move out of the area or carry on in their job. This can lead to envy and resentment, not just from people who know the winners, but also from those in the locality where the winners may move. Thankfully, most large lottery operators have an experienced team of people to help winners adjust to their new life and to minimize potential problems.

It’s unlikely that the downsides of winning the lottery would be enough to put us off playing. Neither is the unlikely probability of winning. Why then – despite the huge odds against – do people persist with their dream of winning the elusive jackpot? Part of the popularity of lotteries in general is that they offer a low-cost chance of winning a very large life-changing amount of money. Without that huge jackpot, very few of us would play.

The probability of winning a large lottery prize is one of the basic risk dimensions that may help us decide whether we gamble in the first place. Some mathematicians say that playing lotteries is a tribute to public innumeracy and that playing the lottery is totally irrational. However, the probabilities of winning something on the National Lottery are fairly high in comparison with other gambling activities, although the chances of winning the jackpot are very small. Therefore, most players don’t think about the actual probability of winning but rely on what we psychologists call ‘heuristic strategies’ – a fancy name for ‘rules of thumb’ – for handling the available information. What most lottery players’ concentrate on is the amount that could be won rather than the probability of doing so.

We also know that the greater the jackpot the more people will gamble. That is why more lottery tickets are sold on rollover weeks because the potential jackpot is huge. Also, by providing lots of coverage for the huge winners, it helps us forget the millions of people who lost!

We also know that as human beings we tend to overestimate positive outcomes and underestimate negative ones. For instance, if someone is told they have a one in 14 million chance of being killed on any particular Saturday night they would hardly give it a second thought because the chances of anything untoward happening are infinitesimal. However, given the same probability of winning the National Lottery and people suddenly become over-optimistic. For instance, one study found that 22% of people thought that if they played the national lottery every week until they died, they would scoop the National Lottery jackpot at some point in their lifetime.

Another factor that may be important in why lotteries are so financially successful is because of the ‘psychology of entrapment’ with people who choose the same numbers every week. By picking the same numbers the person may become trapped into playing every week. Each week the player thinks they are coming closer to winning. The winning day is impossible to predict but should the player decide to stop and cut their losses, they are faced with the prospect that the very next week their numbers might come up. Very simple – but effective – psychology.

Dr Mark Griffiths, Professor of Gambling Studies, International Gaming Research Unit, Nottingham Trent University, Nottingham, UK

Further reading

Griffiths, M.D. (1997). Selling hope: The psychology of the National Lottery. Psychology Review, 4, 26-30.

Griffiths, M.D. (1997). The National Lottery and scratchcards: A psychological perspective. The Psychologist: Bulletin of the British Psychological Society, 10, 23-26.

Griffiths, M.D. (2011). Gambling, luck and superstition: A brief psychological overview. Casino and Gaming International, 7(2), 75-80.

Griffiths, M.D. & Wood, R.T.A. (2001). The psychology of lottery gambling. International Gambling Studies, 1, 27-44.

Wood, R.T.A. & Griffiths, M.D. (2004). Adolescent lottery and scratchcard players: Do their attitudes influence their gambling behaviour? Journal of Adolescence, 27, 467-475.