Question: Tennessee just instituted a state lottery. The initial jackpot is $100,000. If the first week yields no winners, the next weeks jackpot goes up, depending

Tennessee just instituted a state lottery. The initial jackpot is $100,000. If the first week yields no winners, the next week’s jackpot goes up, depending on the number of previous players who placed the $1 lottery bets. The probability of winning is one in a million (1 – 10-6). What must the jackpot be before the expected payoff is worth your $1 bet? Assume that the state takes 60% of the jackpot in taxes, that no one else is a winner, and that you are risk-neutral (i.e., you value the lottery at its expected value).

Step by Step Solution

★★★★★

3.44 Rating (157 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Looking purel... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

90-B-E-M-E (391).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Neha's elder brother purchased "I-phone 6-Apple" mobile phone for S. 65,000 without cash memo from one of his friend-an authorised dealer with a guarantee that the mobile phone will be replaced with...

A fair die is thrown. Depending on the number of spots on the up face, the following random processes are generated. Sketch several examples of sample functions for each case. (a) (b) (c) 1 or 2...

If you bet $1 I Kentucky's Pick 4 lottery game, you either lose $1 or gain $4,999. (The winning prize is $5,000, but your $1 bet is not returned, so the net gain is $4,999.) The game is played by...

15-5. Lottery Expected Value Tennessee just instituted a state lottery. The initial jackpot is $100,000. If the first week yields no winners, the next weeks jackpot goes up, depending on the number...

1. Do you agree or disagree with the decision in the Lambert case (p. 323, textbook). Explain by making EXPLICIT reference to any of the principles of Contract Law (say which one(s) you are using)...

is as follows: 1. Do you agree or disagree with the decision in the Lambert case (p. 323, textbook). Explain by making EXPLICIT reference to any of the principles of Contract Law (say which one(s)...

PLEASE COMPLETE NO LATER THAN 11/04 @8am Each question(1,2,& 3) must be a minimum of 200 words. Please EXPLAIN answers in FULL detail and make answers knowledgeable based off the attached reading,...

COVID-19: The Global Shutdown In the first months of 2020, a pandemic overwhelmed the world. COVID-19, commonly known as the coronavirus, spread from China and created a severe public health...

Probability and Statistics - Problem Set c Keith M. Chugg October 2, 2015 1 Preliminaries, Combinatorics, Set Probability 1.1. A number of bats are in a cave. 2 bats can see out of their left eye. 3...

Supply Chain Management Introduction Outline What is supply chain management? Significance of supply chain management. Push vs. Pull processes utdallas.edu/~metin 1 A Generic Supply Chain Sources:...

An offset tensile link is shaped to clear an obstruction with a geometry as shown in the figure. The cross section at the critical location is elliptical, with a major axis of 4 in and a minor axis...

By Ihar Sahakiants, Marion Festing, Manfred Froehlecke "I would rather lose money than trust. Robert Bosch the report, which described the highlights of 2010 with respect to new markets, particularly...

Find area between the x - axis and f ( x ) over the interval 1 , 5 . f ( x ) = 4 x - 1 2

(a) Find two power series solutions for y'' + xy' + y = 0 and express the solutions y 1 (x) and y 2 (x) in terms of summation notation. (b) Use a CAS to graph the partial sums S N (x) for y 1 (x)....

Consider a variation of splay trees, called half-splay trees, where splaying a node at depth d stops as soon as the node reaches depth d/2. Perform an amortized analysis of half-splay trees.

On July 1, 2015, Velor Inc. acquired the following bonds, which Velor Inc. intended to hold to maturity: BOND Price Face Amount Purchased Face Amount Purchased Zcom Inc. 12% bonds, maturity date...

The price, in dollars, of a certain stock over a 10-day period is given in the following array. price = [19, 18, 22, 21, 25, 19, 17, 21, 27, 29] Suppose you owned 1000 shares at the start of the...

You are in France and are accused of a crime. You ask for a trial by jury. Why is one not available?

Village Hardware is a retail hardware store. Information about the stores operations follows. November 20x4 sales amounted to $400,000. Sales are budgeted at $440,000 for December 20x4 and $400,000...

Between 1995 and 1997, American Airlines competed in the Dallas/Ft Worth Airport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price...

During the early days of the Internet, most dot-coms were driven by revenues rather than profits. A large number were even driven by hits to their site rather than revenues. This all changed in early...

A number of professional associations, such as the American Medical Association and the American Bar Association, support regulations that make it more costly for their members (for example, doctors...

A share of common stock has just paid a dividend of $2.00. The market return is 15% and the beta is 2. The three month T-bill rate is 5%. The expected long-run growth rate for this stock is 15...

Joe Franklin deposits $ 2 2 , 0 0 0 in a savings account that pays 6 % interest compounded monthly. Three years later, he deposits $ 1 6 , 0 0 0 . Two years after the $ 1 6 , 0 0 0 deposit, he makes...

Liability comparisons Merideth Harper has invested $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of payments,...