An Economic Analysis of the Demand for Lotto in Korea and Its Policy Implications
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This paper develops models of the demand for lotto in Korea in order to explore economic issues such as revenue maximization, regressivity, addictiveness and the adequate size of the lottery market. Following Farrell et al. (1999) and Forrest et al. (2000a), we incorporate the expected price of a lotto ticket and lagged sales in the regression of current sales. Major findings are as follow. First, the size of lottery market in Korea is very small relative to the averages of the OECD, Asian countries, and countries with a GDP per capita between $20,000 and $40,000, respectively. This fact implies that there is room to enhance the efficiency of lotteries as a means to finance public goods. Second, the demand for lotto is found to be unit elastic in the short run, but it is inelastic in the long run. Consequently, any measure that increases the expected price of a lotto ticket (for instance lowering the ratio of sales allocated to prizes) may increase lotto sales in the long run. The finding that the price elasticity is greater in the long run than in the short run contradicts the widespread presumption that lotteries are addictive. Third, weak economic conditions (higher rates of unemployment and economic recessions) stimulate lotto sales. Finally, the decrease in the nominal price of a lotto ticket implemented on August 8, 2004 can help explain the continued decrease in lotto sales thereafter.
Abstract
This paper develops models of the demand for lotto in Korea in order to explore economic issues such as revenue maximization, regressivity, addictiveness and the adequate size of the lottery market. Following Farrell et al. (1999) and Forrest et al. (2000a), we incorporate the expected price of a lotto ticket and lagged sales in the regression of current sales. Major findings are as follow. First, the size of lottery market in Korea is very small relative to the averages of the OECD, Asian countries, and countries with a GDP per capita between $20,000 and $40,000, respectively. This fact implies that there is room to enhance the efficiency of lotteries as a means to finance public goods. Second, the demand for lotto is found to be unit elastic in the short run, but it is inelastic in the long run. Consequently, any measure that increases the expected price of a lotto ticket (for instance lowering the ratio of sales allocated to prizes) may increase lotto sales in the long run. The finding that the price elasticity is greater in the long run than in the short run contradicts the widespread presumption that lotteries are addictive. Third, weak economic conditions (higher rates of unemployment and economic recessions) stimulate lotto sales. Finally, the decrease in the nominal price of a lotto ticket implemented on August 8, 2004 can help explain the continued decrease in lotto sales thereafter.
참고문헌 (54)
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