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[personal profile] mtbc
Money is well-known to have a non-linear utility function. For example, from my position I would gladly trade a ⅓ chance of winning $20m for a ⅔ chance of winning $5m. What I have not thought through clearly is the effect on lottery tickets: can it make sense to buy only one ticket or, if it is worth buying any at all, is it likely that buying a few would make even more sense?

On the one hand, if running a lottery is profitable and the utility of money decreases the more I win then that might argue for never buying lottery tickets: the ticket cost is worth too much to me. But, the procedure by which unwon jackpots commonly roll over might make ticket-buying make sense at least for linear utility if the number of tickets purchased does not increase proportionally to the larger jackpot. Can rollovers ever make it rational to buy a bunch of tickets? Perhaps the non-linearity is always enough to scotch even that idea.
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Mark T. B. Carroll

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