EXPRESS: Not Just Bad Luck: Income-Based Gaps in Lottery Losses

Abstract

This research uncovers a hidden dimension of inequality in lottery play: lower-income consumers not only spend a larger share of their income on lottery tickets—a well-documented regressive pattern—but also earn less per ticket due to systematic differences in how games are designed and played. Using market-level and transaction-level data from California, we show that lower-income consumers are less responsive to high-jackpot games, use random number generators less frequently, and favor popular number combinations. These behaviors interact with pari-mutuel prize structures to reduce expected earnings. Simulations indicate that these factors lead to approximately 7% higher losses per ticket for lower-income consumers, amounting to nearly $3 million annually. We evaluate alternative game formats and policy interventions—including fixed non-jackpot prizes, mandatory random selection, and raffle-style jackpots with decreasing odds—and find that they can reduce income-based disparities by up to 60%. By framing lottery products through the dimensions of function, ergonomics, and form, this research strengthens theoretical links between product design and consumer heterogeneity and offers actionable insights for policymakers seeking to design fairer games and more equitable consumer outcomes.