State Lotteries as a Multiproduct Monopoly

Abstract

Stemming from the concept of multiproduct monopoly, we adjust the usual profit maximizing rule of the effective price model, to account for substitutability or complementarity among lottery products as well as a richer structure of prizes in the expected profit function. The new pricing rule is used to assess pricing decisions of the Greek lottery operator, based on a recent sample of two popular pari-mutuel lottery games' data.