Often considered among the more irrational human behaviors, the purchase of lottery tickets may hide inklings into why people engage in seemingly unwise spending.
The last days of the year are often full of hope, emotion, and expectations.
Perhaps, this is why behavioral economists see the final months of the year as a good opportunity to assess why many people buy lottery tickets at least once a year.
Recently, a study published in an international journal, Experimental Economics, explored the utility of playing the lottery in a field experiment.
Utility is a term used in economics for modelling worth or value. Economic theories found on rational choice generally presume that people will eager to augment their satisfaction received from of a good or service.
As a part of the study, researchers in the Netherlands randomly distributed free state lottery tickets to participants of an existing household panel survey, while others were not.
The scientists evaluated the utility of the process of buying lottery tickets and the aftermath by comparing how the momentary happiness of participants and non-participants through a series of surveys.
What they found is that the lottery participation level up the happiness of people before the draw.
Satisfaction of playing
The researchers observed that winning small prizes has no effect on happiness at all and people may not just care about the outcome, but enjoy playing the game as well.
“Before the draw, players may gain procedural utility from the excitement of playing the game, the hope of winning a large prize, as well as social bonding, while after the draw players may gain procedural utility from winning a small prize (which was in almost all cases smaller than the original retail price of the ticket).”
This suggests that participating in the lottery has a non-monetary utility or happiness, value in itself and that part of this utility diminishes before the draw.
So, it seems lottery tickets in some ways feed buyers’ spirits. If so, can these people truly be called irrational agents?
In the heart of Turkey’s capital Ankara, hundreds line up with high hopes to buy lottery tickets every year from vendors in Kizilay Square, making for a potential open-air laboratory to test these behavioral insights.
In interviews by Anadolu Agency on why they braved the central Anatolian cold to get their hands on a potentially enriching ticket, buyers gave a myriad of answers varying from economic hardship to family tradition to a quick gift idea to spread the New Year’s cheer.
According to one weathered vendor, this year saw particularly high ticket sales as people increasingly waited hours in a queue: “Demand for tickets is high compared to last year. Eighty percent of tickets have already been sold. It’s always like this in times of crisis, people buy more lottery tickets.”
Waiting in line, one buyer would not allow previous losses to dampen their hopes. “I buy tickets from the 1000 series every year. I haven’t won yet, but I’ll buy it until I win.”
For others, the lottery has become a cross-generational heirloom. “Buying lottery tickets has become a habit now. Just like a habit passed from father to son,” said one man.
“My grandfather made me buy tickets, I had no intention of buying them,” said another, taking part in an apparently not-so-voluntary family custom.
Some have gleaned that despite the low odds of winning, the thoughtfulness to possibly make friends and loved ones rich is priceless: “I buy lottery tickets as a New Year’s gift for my friends. It makes me happy to see the joy in their face.”
Others still see the payoff as the main motivator, with one person saying: “Although there’s a small chance of winning, I’ll buy it anyway. It’s a hope.”
Further, when given the “rational” choice to sell their tickets at double the price, most people were surprisingly candid. The answer, more often than not, was: “No, they’re mine, I’m taking my chances.”
These responses point to the apparent truth in the ideas of Israeli economist and psychologist Daniel Kahneman, who in his famous prospect theory posited that the satisfaction derived from any financial decision is not only economic but also psychological.
They also appear to show that lottery ticket buyers are, in fact, quite rational in their expectations of the results of their gamble, well aware of their little chances of winning but finding the process itself entertaining.
Choosing the numbers on their possible golden ticket, they seem cheerful, excited, and hopeful — even more so when playing together with family and friends.
However, this does not fully support the second part of Kahneman’s theory, which argues that people tend to overweigh the small chances of winning the lottery.
Though aware of the negative consequences, people often indulge in excesses that provide momentary happiness on certain occasions, like New Year, when they allow themselves to, for example, overspend or overeat. Though seemingly irrational, many would argue that they actually make us happy.
Thus, along with the monetary utility of winning a prize, there may also be a non-monetary utility of the possibility to win, regardless of the payoff’s size — in other words, the joy of the game.