So imagine you have the money to buy all the numbers, but then several other people also own the winning combo. Whoops.
@nottelling suppose you pick all 292M combinations and spend $584M (or $600M as you say) do you make money or do you lose some due to tax on the $1.3B winnings? Even worse, if there are other winners, say another winner, then you would immediately lose $300M or so after tax.
Right, but that’s a probability that can be calculated, and it is at least theoretically possible that the expected return is greater than the cost, even given that risk.
$1.3B x .4 = $520M in federal tax. (40% max rate) if you already make $400K (if you make less, the number will still be close to $520M). 
Federal tax rate 39.6%; for NYC residents, a combined Federal, State and City tax rate of 48.5%. Assume roughly 50% for tax.
- The immediate payout is less than the full jackpot price. Dont know what it is.
- i assume cost of tickets could be deducted, so only the gain would be taxed.
- The probability I was referring to in the last post is the probability that you'd have to share the jackpot, which is the real risk if you bought all combinations.
dadofs, I’m in WA. No state tax. 
Good for you @BunsenBurner … maybe I will move to WA before claiming if I do win :))
If you win, you will be able to afford a starter mansion here, for sure! 
Yes @nottelling that #3 can break the whole deal and some, actually a lot, more :((
Sure, I will throw a party in my starter mansion too, you invited @BumsenBurner, with Bill and Malinda Gates for a charity event :">
We’re not at the point where Bill Gates should cover every number, because although the payout is nominally $1.3 billion, the present value of that money is something like half, so $650 million. Buying all the tickets would cost almost $600 million, and then even if Bill was the only one to select the winning combination, he’d have to pay taxes on it. He’d lose money for sure.
But let’s say the jackpot went up to $2.5 billion. It would still not be possible to calculate Bill’s expectation if he bought all the tickets, because we’d have to know how many other people would also buy tickets, and how their choices would be distributed. One could make some educated guesses, but it would be impossible to make the exact calculation without knowing in advance what everyone else would do.
Immediate payout at $1.3 million is $806 million. And as the jackpot goes up, one could calculate exactly how many people are buying tickets because the increase in jackpot amount is based on number of ticket sales. And one could also calculate the probability of multiple people sharing jackpot.
The increase in the jackpot is based on the ticket sales for the last lottery. We already know the next jackpot but we don’t know how many people will buy tickets for it. And even if we did know that, in order to calculate Bill Gates’s expected winnings, we’d have to know how bunched up the numbers are. Bill is worse off if everyone chooses randomly, and much better off if there are a few popular combinations that many people bet on.
No. If the jackpot increases before the next drawing, as your $2.5 million jackpot figure presupposes, it is because of the number of ticket sales. As ticket sales increase, the jackpot goes up, as was the case last night; according to the article I read it ended up north of $900 million even though when this thread was created it was at $800 million or so.
And, of course there is some variation in numbers selected because of bunching around birthdays etc but that is very easy to deal with in a probability calculation. And, obviously, the expected returns are a zillion times easier to calculate than with any real-life equity transaction, or other contemporary investments such as derivatives. And yet people calculate expected returns based on less than perfect info in those situations all the time. Anyway, it was just meant to be a silly hypothetical; obviously Gates and Buffett aren’t investing in lottery tickets.
Anyway, I’ve never bought a lottery ticket in my life but I might dig up the pennies I would have otherwise essentially thrown out and buy one this time. It is an irrational act but the entertainment value may be worth it just for fun. To justify the irrational act, I’ll use the change under my car mats that is essentially found money.
Well darn now I have to buy another ticket. The odds are astronomical but someone will win, why not me?
I hope whoever wins doesn’t have their life ruined. My father in law won’t buy tickets over a certain amount because he doesn’t want to win too much money.
Could that amount even be spent?
If one guy bought all the tickets, he has a significant negative expected value. The state runs these games because they keep somewhere in the neighborhood of half the amount wagered, after paying the ticket sellers.
I haven’t been able to find the Powerball audited statements and Im not sure what they show since its a multi-state enterprise. But the NY State lottery audit shows just over 9 billion in annual revenue in two recent years, with prize amounts of just under 4 1/2 billion. So I think this is about the same for powerball, give or take.
Thus, if you buy all the tickets (numbers), you will “win”, and the prize with be half of what you’ve wagered, which will be taxable. Of course, you’ll be able to deduct your losing ticket cost against that, so it will eliminate the tax, but you’re still left with only half of what you bet. This means that the game has a negative “expected value”.
The reason people play it is that they don’t have to buy all the tickets to win. And even though its irrational, its a bit like “obverse insurance”. Insurance protects you from unlikely events that have a very negative financial impact. The lottery buys you exposure, or participation, in an unlikely event that would have a very positive financial impact.
Conspiracy theory (mine) suggests that they are deliberately not selecting a winning ticket because the ever increasing jackpot spurs more sales and more revenue for the Powerball powers. Eventually the jackpot will reach $100 trillion and swallow the entire universe like a black hole. The entire GDP will be spent on lottery tickets.
I just wish I could be assured the profits go to good use. Not in theory, but in reality.
If you buy all the numbers, you will win, but keep in mind there is no guarantee of being the sole winner, given the size of the jackpot and the number of people buying tickets, it statistically is a lot more likely there will be multiple winners if the number of people playing increases. So you might buy all the numbers, but if multiple people hit those numbers, your yield with be at least halved.
As far as playing it, it is for the fun of it, for me, it is to see how few numbers I can get right, I play quick pick, and I am lucky to get 1 number right/chance lol.