The welfare effects of Lotto: evidence from the UK

This paper estimates the demand for lottery tickets using pooled cross section data that contain individual incomes and extensive information about characteristics. One of the cross sections corresponded to a draw which was a 'double rollover' - the jackpot was enhanced by adding the two previous draws' jackpots which had not been won. Together, these datasets provide sufficient observations facing different 'prices' to allow us to estimate the 'price' elasticity as well as the income elasticity of demand. We estimate Tobit and other specifications and use the estimates to evaluate the welfare effects arising from the introduction of the lottery. (C) 1999 Elsevier Science S.A. All rights reserved.