|Posted: January 8, 2009, 12:20 pm - IP Logged|
Ummm.... it's actually pretty simple. When you bet a dollar on a straight Pick 3, you can only win the top prize, $500. When you bet a dollar on the Cool 7's game you can win any of those prizes, so any return has to figure your chances for every prize into it.
Return rate is the average return on your dollar.
One easy way to understand it is to imagine if you cover ALL of your bases. Let's say you buy all 1,000 possible numbers for the evening Pick 3 drawing. Well, you'll win.
But you'll only win $500, when it cost you $1,000 to play all those numbers. So your return is 50%, or 50 cents on every dollar you spent.
Look up at that odds slip. Pretend that you bought EVERY Cool 7's ticket in South Carolina. That would cost you $2,400,000 because that's how many one dollar tickets there are. You would win many times and end up with $1,414,285 in prize money. That would be 58.93% of what you had spent though. So, your return on each dollar would be an average of 58.93%
Return rate is the most honest estimation of how good a game is. Odds don't matter; they only affect the standard deviation (a fancy way of saying how often you'll be up and down).
Imagine two games. In one game, we flip a coin and every time it lands on heads you win a dollar from me, and when it lands on tails, you pay me a dollar. Well, assuming there is an equal chance of either side landing then the return rate for that game (for either of us) would be 100%. What that means is that if we played long enough we would expect to neither make any money. After a billion coin tosses, one of us might have a little more than the other, but if there truly was an even chance of both sides of the coin landing, we would both have about as much money as we started with.
Now imagine the second game, one in which I write down a random number from one to million on a piece of paper. You pay me a dollar to guess the number, and if you get it wrong, I keep the dollar. But if you get it right, I give you a million dollars. If you want to play again, I write down a new number.
Well, the return rate on that game is 100% percent too. You might go a long time without correctly guessing the number, but if you played long enough you eventually would guess it and you'd win a million dollars. After a long enough time playing, we'd both have about the same amount of money as when we started.
The lottery doesn't sell games that have a 100% return rate because then they wouldn't make any money. But some games are better than others. Single deck blackjack, in a fair casino, played properly can have a return of OVER 99%. Hell, even Powerball with a massive enough jackpot (and assuming you won't have to share the jackpot if you win it) can have a positive rate of return.
But Pick 3 will forever be a 50% return unless they increase the prize money from $500. If they increased it to $1000, then the rate of return would be 100% but they will never do that. If you gamble and play nothing but Pick 3 all your life, and over the course of your life you spend a million dollars on Pick 3, you will have won about $500,000. (Whether you reinvested this back into Pick 3 tickets for the same terrible odds is your business).
Most scratch off tickets aren't much better, but they are better than 50%.
If you gamble long enough, you will eventually lose. But how much you lose is determined by the games you play.