A community group in Marin County is raffling a $2 million home for only $150.  The winner will have the option to take the house or $1.6 million in cash if they win.  Of course, they would have to pay all of the applicable taxes and all.  Last year only 34,000 people bought tickets.  That means that you’d be paying $150 for a 1 in 40,000 chance to win.  That’s not a bad deal for those odds.

3 Comments »

  1. Actually, that is a horribly bad deal (worse than Vegas odds). If you have a 1 in 40,000 chance of winning a $2,000,000 prize, the ticket would need to cost $50 for it to be considered even money.

    Of course, it’s a great deal for the community group. They’ll rake in $6,000,000 if they do sell 40,000 tickets (@ $150) and only have to part with a $2,000,000 house (or even less in cash).

    #1 by Math Dork — September 9, 2008 @ 8:45 am

  2. I totally agree that compared to Vegas odds this is a really bad deal, as the actual odds are 40,000 to 1, but you are paid only 13,333 to 1. That’s a whopping house advantage of 66.7%. In contrast, the house advantage betting the pass line on a craps table is only about 1.4%.

    But that is comparing apples and oranges.

    If you take this raffle, or lottery, and compare it to the odds of winning the State of California Super Lotto jackpot it is a better deal. The actual odds of winning the lowest CA lottery is about 18,000,000 to 1, but you get paid $3,000,000 for your $1 bet. That’s a stratospheric house advantage of 83.3%.

    That being said, the raffle in Marin is a much better deal than betting on the State of California lottery. However, you have to pony up $150 for the advantage. Ultimately, you have to compare lottery odds to lottery odds, not to table game odds.

    #2 by Nugget — September 9, 2008 @ 11:23 am

  3. Additionally, I don’t know if there’s an economic term for this, but I think it’s rational to engage in high-payoff, low-investment chances. For instance, a $1 lottery ticket for a $3,000,000 prize, even if the house advantage is 6:1. Well, what do you get for that? Probably not $3M. But do you get $1 worth of entertainment? I think yes.

    In the case of $150, let’s assume that this is affordable — you aren’t putting it on a credit card (or not paying off $150 on your account), you aren’t taking food off the table, etc.

    Is x weeks of thinking you have a chance at a $2M Marin home worth $150 in entertainment value? I dunno’ — that’s 3 XBox games! BUT… I don’t think it’s a _terrible_ deal.

    What _is_ irrational, in my view, is buying a SECOND lottery ticket! Your marginal entertainment increase is minimal.

    That’s my theory and I’m sticking to it.

    #3 by Larry — September 9, 2008 @ 2:04 pm

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