Hi,

maybe I do not share your concept for linearity. The expected loss / gain 
is simply a signed multiplication of the loss / gain by odds, and then sum 
them up. As people seem to understand it, there is an interesting 
phenomena: to hit a jackpot on a lotto, the probability is fixed. However, 
as jackpot increases, so do the amount of tickets sold on that particular 
week. People seem to "feel" the increase of expected gain contrary to the 
loss which is in turn fixed.

We have here in Hungary also a 5/90 lottery. Here is a probability of full 
5 hits approx. 1 to 44E6. On a normal week, approximately 2.5 Mio tickets 
are sold, and the jackpot is approx. 50 Million HUF (local money). The 
amount of tickets is too small to guarantee a full hit every week so the 
jackpot increases. I have seen 5 Billion (!), which is 100 times of a 
straight week. You could imagine not only the cumulation contributes the 
amount. Even a lot of people begin to play from abroad.

Regards,
Imre

On Thu, 6 Apr 2006, Gerhard Fiedler wrote:

> Mike Hord wrote:
>
>>> That's why our state lottery is sometimes referred to as a tax on people
>>> that are bad at math, or a "stupidity tax".  Seems to work pretty well.  I
>>> always get a chuckle out of people mentioning that so-and-so won some money
>>> in the lottery.  Please, tell everyone, it will only encourage more to play.
>>> I love it when other people pay my taxes for me.
>>
>> I hear that statement a lot, and while I generally agree with it, I think
>> it only applies to some lottery players.
>>
>> For example, on the once every year-or-two schedule that I buy a lotto
>> ticket, I get my dollar's worth out of it in enjoyment, which is to say that
>> win or lose, the anticipation, daydreams, etc., that the dollar buys are
>> worth substantially more to me than, say, a candy bar or a cheeseburger,
>> or any of many other things that that buck would've bought elsewhere.
>
> Exactly. The simple view of things is only at the probabilities. But this
> completely misses the non-linearity of cost and gain. In many contexts, a
> rare cost of $1 is considered negligible, whereas a gain of $1M can change
> the way a life goes -- or even the gain of merely playing is already worth
> it. So multiply that with the appropriate probabilities, and it may start
> to make sense :)
>
> The same thing goes for big disasters etc. The cost/gain is in most cases
> not linear, so you really need to look at what you are applying the
> probabilities.
>
> Gerhard
>
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