title: The economics of gambling
title: a collection of essays
titleType: Subtitle
Creators: name: Wheeler, Rhys
Publisher: name: Lancaster University
Year: 2018
Subjects: Economics
Microeconomics
Applied Microeconomics
Gambling
Addiction
Health
Health Economics
Problem Gambling
Lotto
Engel Curve
Income Elasticity
Demand Elasticity

description: Chapter 2 examines the harm associated with being a problem gambler.
      Problem gambling is conventionally determined by having a score in a
      questionnaire screen that exceeds some critical value. The UK is fortunate
      in having large representative sample surveys that embed such questions,
      and our estimate from the 2010 survey is that several hundred thousand
      people in the UK could be afflicted by PG. However, existing literature
      has not evaluated the size of the harm associated with being a problem
      gambler and this chapter uses this individual level survey data to
      evaluate the effect of problem gambling on self-reported well-being.
      Together with a corresponding effect of income on well-being a
      money-metric of the harm associated with being a problem gambler is
      derived. An important methodological challenge is that well-being and the
      harm experienced may be simultaneously determined. Nonetheless,
      instrumental variable estimates suggest that problem gambling imposes an
      even larger reduction in well-being than least squares would suggest. The
      role of gambling expenditures in the transmission between problem gambling
      and well-being is considered, distinguishing between draw-based games,
      such as lotto, from scratchcards, and from other forms of gambling.
      
      Chapter 3 investigates the price elasticity of demand for the UK National
      Lottery – a state-licensed, draw-based lotto game. Little is known about
      the price elasticity of demand for gambling products because the “price”
      is typically hard to define. The exception is “lotto” where an economics
      literature has focused on the response of sales to variations in the prize
      distribution. Existing literature has used these responses make inferences
      about the price elasticity of demand, where price is defined as the cost
      of entry minus the expected winnings. In particular, the variation in the
      value of the jackpot prize pool, due to rollovers that are a feature of
      lotto, has been used as an instrument for price. This chapter argues that
      rollovers do not make valid instruments, because of their correlation with
      lagged sales, and propose an alternative identification strategy which
      exploits two arcane features of lotto. Finally, this chapter evaluates
      whether changes to the design of the UK National Lottery in 2013 and 2015
      had a positive effect on the sales figures.
      
      Chapter 4 investigates the extent to which the large, flat-rate tax
      imposed on the UK National Lottery is regressive. This chapter evaluates a
      Working-Leser demand model for lotto tickets using both Heckman’s
      selection model and Cragg’s double hurdle estimator using household-level
      data. A unique strategy is employed to identify these two-stage routines
      by exploiting exogenous differences in consumer preference arising from
      religious practice. The income elasticity of lottery tickets is found to
      be significantly lower than previous estimates, suggesting that lottery
      tickets are inferior goods and that the (high) flat-rate tax imposed on
      lotto tickets is more regressive than previously thought.
      
      Whilst the three chapters are stand-alone essays, they are linked by the
      use of modern statistical techniques and the use of the best possible
      data. Together, they address key issues on the economics of gambling and
      the results are new to their respective literatures and of interest to
      academics and policy makers alike.