On March 30, a production manager named Richard Wahl won Mega Millions and will be receiving $324,600,000. However, this is not the reality of many people who play the lottery, especially since the odds of winning the jackpot is only 1:302,575,350 according to the Mega Millions website. This was only Wahl’s second time purchasing a Mega Millions ticket, but some people purchase dozens of tickets a year. This brings up the question as to why anyone would play any sort of jackpot that has such a low probability of winning.
The utility theory would suggest that nobody would buy tickets because the probability of winning is much lower than the probability of losing, so the utility would be negative. The utility theory suggests that people will estimate the expected utility and make a choice based on the best option, which in this case, would be to not purchase a lottery ticket.
However, the utility theory has evidence against it since people can make different choices based on something such as wording and availability, which would not impact the equation used to calculate expected utility. The prospect theory of probability tells us that people have a higher weighted probability when the actual probability is low, and a lower weighted probability when the actual probability is high. This means that for most probabilities, other than around the 20% probability mark, people either overestimate or underestimate the likelihood of an event occurring. The probability of winning the Mega Millions is extremely low, yet people are still able to imagine, or even believe, that they could realistically win millions of dollars. This allows lottery players, such as Richard Wahl, to be risk seekers and play Mega Millions.
Wahl described in an interview that he felt paralyzed when he won what he initially thought was $1 million. He and his family are middle-class, so one million dollars would feel extremely good to him, explaining why he felt unable to bring his ticket with him anywhere or leave it at home, causing his Easter plans to be cancelled. Although the CNN article does not discuss how Wahl’s reaction changed when he realized his ticket would give him over $300 million, he likely did not feel too much happier than he did when he thought it was $1 million. This can be explained by the prospect theory of value function.
Since Wahl won Mega Millions, any amount would be a gain. This would mean that his happiness would be higher than it was before he had extra money. However, even though $1M to $324M is a much larger difference than his baseline amount of money to $1M, happiness would not increase as much between when he thought he won $1M and after his realization that he won more. This is because as you have more of something, such as money, it has less value to that person. This leads me to believe that realizing he would be $323 million richer than he thought he would be with the $1 million win, he likely did not experience as much of an increase in happiness. This seems to be confirmed by Wahl’s goals, such as restoring a Corvette, retiring, and helping a few relatives financially; most of which could have been achieved with only the original $1 million.
As long as people are willing to be risk seekers and spend a few dollars in order to potentially win millions, Mega Millions will stay in business because of the prospect theory. Richard Wahl is one of the few people who have won, and the fact that he has been on the news so much lately impacts availability. Many people will remember the last person who won, so they are more likely to predict that they have a possibility of winning as well and purchase a ticket themselves. I would not personally buy a Mega Millions ticket because I see it as nearly impossible to win, which means I have a more moderate probability weighing and the difference between the actual probability and how I act is less than someone with more severe probability weighing.