This paper considers the relationship that exists between two lottery products offered simultaneously in the same state, a smaller lottery game run by the individual state and a larger multi-state game run in coordination with other states. The primary issue is whether the two different products should be considered substitutes or complements for one another. The question is considered from two different perspectives that lead to a conclusion that while the two products do tend to be complements to one another, overall the individually run state lottery games experience a reduction in sales from the presence of the multi-state game. Copyright International Atlantic Economic Society 2006D81, H71, L83,

This chapter surveys the literature on the economics of lotteries and is organized around two central themes. The first section examines the microeconomic aspects of lotteries, including consumer decision-making under uncertainty, price and income elasticities of demand for lottery tickets, cross-price elasticities of lottery tickets to each other and to other gambling products, consumer rationality and gambling, and the efficiency of lottery markets. The second section covers topics related to public finance and public choice, including the revenue potential of lotteries, the tax efficiency and dead-weight loss of lottery games, the horizontal and vertical equity of lotteries, earmarking and the fungibility of lottery revenues, and individual state decisions to participate in participate in public lotteries.

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The "Halo Effect" occurs when lotto ticket sales are unexpectedly high following a large jackpot. An examination of the Powerball lottery finds evidence that the halo effect exists and that it is the result of bettors exchanging prize winnings for new tickets. JEL Classification Codes: D81, H71, L83

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