DEMAND FOR LOTTERY GAMBLING: EVALUATING PRICE SENSITIVITY WITHIN A PORTFOLIO OF LOTTERY GAMES

Michael A. Trousdale · Richard A. Dunn

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Consumer Market Behavior and Pricing Economic and Fiscal Studies Economic and Environmental Valuation

Abstract

This article introduces a new approach to analyzing whether lottery games are complements or substitutes, and whether a portfolio of lottery games is optimally priced. We estimate Barten's synthetic differential demand system for the on-line lottery games operated by the Texas Lottery Commission. The demand system approach imposes theory-consistent demand restrictions that allow identification of parameters for games without price variation. We use the estimated parameters from the Barten model to construct expenditure and price elasticities. Results indicate that on-line games in Texas are generally substitutes for one another and the portfolio of games is not priced to maximize profit.

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References

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