Why do people gamble?

Have you ever purchased a lottery ticket thinking, “Maybe this time the big winner will be me?” Do you play the same lottery numbers every week because you believe that as soon as you change them, they are sure to be the winners? Emily Oster ’02, became intrigued by these questions in her class on behavioral economics. A paper on the demographics of lottery behavior sparked Emily’s interest in the players of Powerball, the multistate lottery with two drawings each week, and started her thinking about possible thesis topics.

When Oster discussed her thesis ideas with Alvin Roth, George Gund Professor of Economics and Business Administration, he agreed the Powerball Lottery would be a worthwhile and interesting topic, adding that Powerball is at “the nexus of economics, psychology, and pop culture.” To get a start on her thesis research over the summer, Oster applied for and received a Harvard College Research Program (HCRP) grant with Roth as her adviser. The HCRP grant covered her personal expenses and 2 million pieces of Powerball data from Connecticut. With Roth’s guidance, Oster determined the most useful questions to research and designed a FORTRAN program for analyzing the data.

“Powerball is a multistate lottery run by a central consortium and supported by 25-plus states that sell tickets,” explains Oster. “It allows people to pick numbers for five white balls and one red ball – the ‘powerball.’ The jackpot is won only if someone gets all five white balls and the powerball (the odds of this happening are one in 80 million), but getting lesser combinations can win you up to $100,000.” She adds, “The jackpot rolls over to the next drawing if it is not won, and the biggest total ever was $290 million.”

Oster says that researchers in different fields have “wildly different ideas” about why people play the lottery. Sociologists, for example, believe that people play because of their social networks, with the lottery giving them something to talk about with their friends on a regular basis. Psychologists, on the other hand, say that playing the lottery is a response to feeling lucky or being in a good mood. Meanwhile, economists believe the lottery is about people wanting more money, but not understanding they have virtually no chance of actually winning. Researchers have shown that residents of more affluent towns purchase fewer lottery tickets than those in less affluent areas, possibly because of their ability or willingness to recognize the improbability of winning.

Oster’s preliminary findings show that people play more as the drawing gets closer, a fact that puzzles her. It makes sense that more people play on Fridays or on the first of every month, which are likely paydays. However, when the jackpot is announced, more people buy tickets, thereby making their odds of winning even smaller. Oster believes that many people who buy tickets are simply “addicted to the fun.” And contrary to what sociologists and psychologists assert, she has discovered that a person’s motivations for beginning to play are completely different from the reasons they continue to play.

These and many other findings have led Oster from what was once a broad topic to a very specific question: to what extent are people playing Powerball to win money? Oster’s thesis will explore theoretical approaches to the lottery, as well as address the differences in interpretation among lottery researchers in various disciplines.

Oster says she enjoys working on the topic because “everyone, no matter what his or her discipline, has something to say about it and theories to share.” In fact, people she barely knows have been sending her e-mails and news articles. In a report to the HCRP, Oster admitted she caught the “bug” herself this summer and bought several lottery tickets. “Unfortunately, I didn’t win,” she wrote, “which is why I’m submitting this final report for the second half of my grant.”