Friday 8 August 2008

The Voice - Consumer's Voice

Dear Consumer’s Voice

Should I play lotteries on the internet? Are they a scam?

No, you shouldn’t play online lotteries. Are they a scam? Yes and No.

As we all know many countries have national lotteries. These often raise money for good causes and get huge public support. Millions of people buy cheap lottery tickets and there’s huge publicity for the results and the winners. The prizes can be enormous, often millions of dollars or pounds.

However the trouble with lotteries is that they are based on our failure to truly understand mathematics. The UK lottery is fairly typical. You have to select 6 numbers between 1 and 49. If the 6 numbers you select are the ones drawn then you win the jackpot. Simple as that. Somehow the odds seem fairly good. Six out of 49 isn’t high but it’s more than 1 out of 49 isn’t it?

On the contrary. Do you know how many different ways you can choose 6 numbers from 49? 13,983,816. The likelihood of you choosing the correct 6 numbers is almost 1 in 14 million. If you enter such a lottery every week of your life you’re not going to win the jackpot. If you entered it every day you still wouldn’t win. Lotteries cover this up to some extent by having a range of smaller prizes. If you only get 5 correct numbers you get a smaller return. If you get 4 you get an even smaller prize.

The best way to view lotteries is to look at the “expected value” of your ticket. Typically people who buy lottery tickets will, on average, get only half of their money back. Entering lotteries is just a very efficient way of throwing money away.

Then there are the online versions of these lotteries like This company buys UK and Euro lottery tickets on your behalf and send you a scanned copy of your ticket as confirmation. However you have to pay £3 for a ticket that costs only £1 in the UK. You’ll get even less of a return if you have to pay them a 200% mark-up on the ticket price.

So no, it’s not a scam, it’s just foolish.

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