Finance

This is how great the chance that you will win the State Lottery on New Year’s Eve

Participating in the Staatsloterij is a tradition for many Dutch people, although we all know that it will most likely not make us millionaires. Nearly 7.1 million tickets were sold (7,081,000) for the 2020 New Year’s Eve draw. That made the odds of winning the jackpot 1 in 7.08 million, or 0.00000014.

Estimating too high

“We tend to overestimate opportunities,” says journalist and economist Mathijs Bouman. “We do that with lotteries, but also, for example, when taking out unnecessary insurance.”

“That principle is the same: we are frightened or made fun of with a certain prospect and forget to look at the probability calculation. In the field of probability we are very stupid, we are very bad at that. Then we fall back on ‘magical thinking’. Just blow the dice before throwing or buy your lottery tickets from a store that has already won several prizes.”

Lack of knowledge

“It is precisely that lack of knowledge about statistics that lotteries come in handy. The chance that someone will win that prize is 100 percent, really, someone is going to win it. But the chance that you will win it is almost zero.”

If you are such a lucky person who can look forward to a hefty cash prize, then the question is what to keep from that amount:

According to professor of finance at the VU Martijn van den Assem, lotteries make clever use of our imagination in their advertisements. “Probabilities of a given event are estimated more likely the easier they are to imagine.”

Winners in advertising

“By having lottery winners appear in commercials, a lot of people think: that could have been me. It’s crazy smart to portray the small chance of winning the top prize in that way.”

Shouldn’t lotteries increase the chance of winning a nice prize by dividing the prize pool over different tickets? Then, for example, 30 people would win 1 million instead of 1 person 30 million. “That is often said,” says Van den Assem.

Fewer tickets sold

“And it would also be fairer. But it turns out that if lotteries do that, fewer tickets are sold. It is apparently more tempting for participants to participate if the main prize is huge. Even though the chance that you will win is almost zero .”

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