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Is PB inferior to MM?

Topic closed. 9 replies. Last post 11 years ago by Jake649.

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Seoul
Korea, South
Member #21859
September 16, 2005
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 Posted: September 27, 2005, 7:58 am - IP Logged

From players' perspective, because MM has higher cash value ratio than that of PB,

MM might look more attractive than PB even when they have same amount of annuity jackpots. Can it be supported? That is, would MM be superior to PB even if two annuity jackpots are same? (Assumed one is lucky enough to buy each ticket for just \$1 and applied currently available cash value ratios for MM and PB)

1) (For just curiosity) At what amount of cash value, would the Expected Value(EV) be equal to \$1, for each of MM and PB?

MM: 144.0M CVO led to EV \$1.0001

PB:  117.5M CVO led to EV \$1.0001

Then, CVO numbers can be converted to annuity jackpots, respectively.

MM: 144.0M CV is equivalent to 236.6M Annuity

PB:  236.9M CV is equivalent to 236.9M Annuity

====> At around 237M, both MM and PB had the EV of \$1, which might be a  realm of gambler's dream!

2) Then, what would be the EV of MM and PB, when both of them stand at 148M annuity jackpot, like PB's Sep. 28, 2005 drawing?

MM: 148M Annuity ===> 90.1M (CVO) ===> \$0.695 (EV)

PB:  148M Annuity ===> 73.4M (CVO) ===> \$0.699 (EV)

3) (Same math as 2) How about the EV of MM and PB, when both of them stand at 250M annuity jackpot?

MM: 250M Annuity ===> 152.2M (CVO) ===> \$1.047 (EV)

PB:  250M Annuity ===> 124.0M (CVO) ===> \$1.046 (EV)

Given the evidently higher cash value ratio of MM than that of PB, it is surprising to see that, if advertised jackpot amounts are same, their corresponding expected values are nearly same.

Can we still say or imply that, given the same amount of annuity jackpots, PB is less attractive than PB? Aren't they indeed EVEN?

Member #2673
November 2, 2003
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 Posted: September 27, 2005, 9:59 am - IP Logged

Two questions.

What is CVO? I assume CV is cash value.

Are you using the after tax amount to calculate EV? If you are not, then the EV is incorrect.

Good luck,
Jake

Seoul
Korea, South
Member #21859
September 16, 2005
346 Posts
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 Posted: September 27, 2005, 11:07 am - IP Logged

Two questions.

What is CVO? I assume CV is cash value.

Are you using the after tax amount to calculate EV? If you are not, then the EV is incorrect.

Good luck,
Jake

1) Sorry for not clarifying CV. Yes, I meant CV as cash value, and CVO also as cash value. (O, which I intended to mean "option", needs to be ignored).

2) I did NOT take income taxes, Federal or State, into consideration just because they differ depending on winner's status of US Citizenship, specific State where tickets are purchased, etc.

3) Because income taxes were not taken into consideration while calculating the expected values, the NET expected values should be SMALLER by the income tax rate. You get the right point.

3) My calculation might be incorrect. But, given the objective of comparing the attractiveness of PB and MM, I think that, despite their inflated expected values due to using before-tax amount, the basic implication should not differ significantly.

Good luck!

United States
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September 17, 2003
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 Posted: September 27, 2005, 1:23 pm - IP Logged

Well for a prize at 200 million, in PB you would get less than half. Around 93-97. In MM you would get just over 60% or 120-124 million. Not hard to figure out which one is better to win IMO. Of course for my situation I live in WA a MM state with no income tax. For me to play PB I need to drive to Oregon which has a 9% income tax that is not deductable from the federal one. So for me it's a lot less money.

Chief Bottle Washer
New Jersey
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May 31, 2000
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 Posted: September 27, 2005, 1:34 pm - IP Logged

It doesn't look like the game odds were taken into account.  Seems to me that Powerball has better odds.  Also, a comparison of lower-tier prizes is important (as well as odds of winning those prizes).

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Seoul
Korea, South
Member #21859
September 16, 2005
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 Posted: September 27, 2005, 7:27 pm - IP Logged

Thank you for your interest in my interest, some LP members!

The major thrust for me to happen to calculate PB & MM's expected values was just my curiosity, which all of a sudden occurred in my mind while reading the LP posts talking about the lower cash value ratio of PB in compared to that of MM, and some seemingly conflicting opinions on the attractiveness of cash and annuity.

First of all, income tax was the most tricky factor in calculating the corresponding expected values, largely because 1) some of the lower-tier prizes are taxed but still others(currently, less than \$600) are not taxed at all, and 2) each State has different State income tax rate, 3) non-US citizens are taxed 5% more than US citizens. Even though income tax was not considered during the calculation process, one can easily guess its influence on the expected value. For example, if a player lives in a State with NO State income and, thus, only 25% Federal income tax, the expected value of \$1 ticket would go down by slightly less than .25, but not as much as .25 because 4th-and-lower-tiers' prizes are not taxed at all. And, if one lives in a State with State income tax, his/her expected value should go down by a margin very slightly higher than that in a State with no State income tax.

Second, the expected value was calculated as the sum of the odds multiplied by the corresponding payout in each of the 9 prizes including the assumed amount of jackpots.

On one hand, as Todd pointed, the simple odds are higher in PB than in MM. On the other hand, given the same amount of annuity jackpot, MM has higher cash value ratio than PB. Therefore, it seems, these two components might have crossed out the corresponding influences each other, leading to the nearly same expected values between the two worldwide lottery leaders in producing multi-millionaires, Powerball and Mega Millions.

Good luck!

New Mexico
United States
Member #12305
March 10, 2005
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 Posted: September 27, 2005, 8:09 pm - IP Logged

There's also the PB multiplier which has to figure in as a potential plus for PB.  The combination of lower tier prizes and the multiplier, should the player use it, offers a set of possibilities far superior to MM outside Texas, even after the changing of the powerplay protocols recently.

Jack

Absorb the good, ignore the bad, weigh the ugly.

Egos don't count.

Dedicated to the memory of Big Loooser

Mcminnville, Oregon
United States
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December 13, 2003
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 Posted: September 27, 2005, 8:22 pm - IP Logged

I don't think powerball is inferior to mega millions.  I like powerball because it has lower odds then mega millions, it is in my state, the lower prizes are higher if you play powerplay which I do.  The jackpot might not be as high as mega millions but 73.4 million dollars is still alot of money if you only spent \$4 to get it.

USA
United States
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July 15, 2003
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 Posted: September 27, 2005, 9:12 pm - IP Logged

In some cases, as mine, this arguement is pointless as I only have the choice of PB but if I could play both I would even if not to chose between the two. I play MM online when the Jackpot goes over \$100 mil. Otherwise it's a two hour drive to get MM. It's a good topic, worthy of some thought but IMHO I play any lotto I can with a cap on weekly spending. I like the possiblity of winning any one of them. CHeers,

Member #2673
November 2, 2003
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 Posted: September 27, 2005, 9:29 pm - IP Logged

When calculating the expected value of the jackpot prize, the probability of a single or multiple winners must be taken into consideration. Those probabilities are affected by the odds and the sales for that particular draw.

It is for that reason that the expected value rises slowly as the jackpot grows. That is, as the jackpot grows, sales also grow and increase the possibility of a multiple winner.

I calculate the expected value of the lotteries I play and only play when the expected value is relatively high.

Good luck,
Jake

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