“Happy Lottery Winners and Lottery-Ticket Bias”, 2020-05-22 (; similar):
The world spends a remarkable $250 billion a year on lottery tickets. Yet, perplexingly, it has proved difficult for social scientists to show that lottery windfalls actually make people happier. This is the famous and still unresolved paradox due initially to et al 1978.
Here we describe an underlying weakness that has affected the research area, and explain the concept of lottery-ticket bias (LT bias), which stems from unobservable lottery spending [making players much poorer]. We then collect new data—in the world’s most intense lottery-playing nation, Singapore—on the amount that people spend on lottery tickets (n = 5,626).
We demonstrate that, once we correct for LT bias, a lottery windfall is predictive of a substantial improvement in happiness and well-being.
…Nevertheless, a key problem is the following. If a scientific investigator observed someone who won 1,000 dollars, the scientist would not expect the person to be happier if that individual had already had to spend 1,000 dollars in order to get the lottery tickets. Empirical studies of lotteries have usually been forced to ignore this point, because investigators traditionally have not had data on ticket purchases. Yet, by definition, the way to get lottery wins is to buy tickets, and the greater is the number of tickets, the larger is the expected size of a person’s win. Hence, in situations where information on ticket purchases is not available to the researcher, there will be an innate downward bias in estimates of the happiness from lottery wins. We term this lottery-tickets (LT) bias. The current study attempts to correct for this form of bias (the potential existence of which has been pointed out before in the literature, such as in 2015, although the authors were only able to control for fixed effects as a partial fix for the problem).
…Panel B of Table 1 gives further descriptive statistics on the lottery-related variables in the SLP data set. The numbers reveal the extensive use of the lottery in the country of Singapore. ~52% of respondents purchased a lottery ticket at least once in the previous 12 months. Of the respondents who purchased lottery tickets at least once, 45% of them purchased tickets every week. Average annual spending on lottery tickets per player was S$1,687 (US $1,221 or £994 UK sterling). Of those who purchased a lottery ticket at least once in the last 12 months, 43% of them won at least once, with average winnings of ~S$353.5 As would be expected, the data indicate the extent of negative net returns to customers.
In our data set, the minimum and maximum of lottery ticket spending are S$1 and S$72,800. The minimum and maximum of (individual) lottery prizes are S$0 and S$30,000.
Singaporeans are known to be some of the world’s most avid lottery players. According to an annual survey on worldwide lottery sales, Singapore has the world’s largest lottery spending per-capita (Singapore National Council on Problem 2015). An annual lottery ticket spending of S$1,687 in our data set is a strikingly large amount by the standards of most nations…the top 10% of lottery players spend a remarkable S$9,000 + a year.
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