They think, well, for a million, it's not worth a dollar. When people behave irrationally, opportunities exist for others to profit. That's why casino gambling became a Wall Street darling in the 1980s. Lesser prizes are often awarded for matching fewer than six of the numbers. Lottery agencies take out from 40 to 50 percent of each dollar bet, some of which covers operating costs and the rest of which is turned over to the state.
Individual rationality is put to the test in the gambling market.
The odds of doing this are nearly 1 in 14 million. That's a risk-reward ratio of 7 to 1, in favor of the lottery agency. There are lesser prizes than the jackpot in most of these games. The odds of matching 5 numbers out of 49 is 1 in 2.3 million. That's a risk-reward ratio of 20 to 1.