Dueling Jackpots: Are Competing Lotto Games Complements or Substitutes?

Abstract

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,

Market Cannibalization Within and Between Gambling Industries: A Systematic Review

“…Of the 19 study observations analysed, 13 indicated substitution (Brown & Rork, 2005;Farrell & Forrest, 2008;Fink & Rork, 2003;Forrest, Gulley, & Simmons, 2004;Garrett & Marsh, 2002;Grote & Matheson, 2006;Mikesell & Zorn, 1987;Roger & Chabi, 2009;Stover, 1990;Tosun & Skidmore, 2004;Walker & Jackson, 2008), two found a complementary relationship (Forrest & McHale, 2007;Purfield & Waldron, 1999), and four found no impact (Farrell & Forrest, 2008;Forrest et al, 2004;Gulley & Scott, 1993;Lin & Lai, 2006). This result indicates that intra-product cannibalization (Srinivasan et al, 2005) is common in the lottery markets.…”

“…Grote and Matheson (2006) suggested that multistate lotteries cannibalize some of the sales from state lotteries, but that the overall benefit for lottery companies is positive.…”

Network externalities in consumer spending on lottery games: evidence from Spain

“…An early example of substitution-cross price effects-between different gambling activities is Forrest et al (2005) in the case of betting and lotto. Grote and Matheson (2006) found evidence of both complementarities and substitution between a single state lotto and a larger jackpot (highest payoff) multi-state lotto. This article can be thought of as an investigation of the micro-foundations of the results in Grote and Matheson (2006).…”

“…Grote and Matheson (2006) found evidence of both complementarities and substitution between a single state lotto and a larger jackpot (highest payoff) multi-state lotto. This article can be thought of as an investigation of the micro-foundations of the results in Grote and Matheson (2006). Their discussion of the issue of substitutes versus complements in lottery games, based on their examination of the relationship between a multi-state and a single state lottery game, informs our analysis.…”

“…Their discussion of the issue of substitutes versus complements in lottery games, based on their examination of the relationship between a multi-state and a single state lottery game, informs our analysis. The games we examine closely match those examined by Grote and Matheson (2006). We examine two competing passive lottery games in Spain, the Loteria Nacional, and El Couponazo de la ONCE, and a multi-nation active lottery, the Euro Millones game.…”