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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.

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.