Lottery Analyst Considers What Price Increase Would Mean For Draw Games

Mega Millions could be looking at raising its prices later this year.

Multiple sources have indicated the popular multistate lottery draw game will go from $2 per ticket to $5.

That’s a significant increase in price that would have a lot of repercussions. Not just for Mega Millions, but also for fellow draw game, Powerball.

PlayiLottery spoke with Tim Chartier, Professor of Mathematics and Computer Science at Davidson College, as well as a lottery analyst, on the impact the price increase could have:

“As we’re seeing the $1 billion mark with some frequency, we still see excitement about it from the public, but not quite the way we did when jackpots were first reaching $1 billion. Raising the price of a ticket is certainly a way to get to bigger jackpots, but if they exclude enough of the market, then it’s not going to look a whole lot different than it does now. People will just be paying more.”

Mega Millions looking to raise prices?

With reports out that Mega Millions is considering raising prices, PlayiLottery reached out to the Georgia Lottery Corporation, the supervisor of the game, about the topic.

The GLC didn’t deny the report, but said, “We’ll keep you updated if and when any changes are made.”

A change in price wouldn’t be new for Mega Millions, as it went from $1 per ticket to $2 in 2017.

With the price increase, the game offered more secondary prizes, while also making the odds of winning the jackpot longer in order to help increase the pot size more consistently.

Should Mega Millions increase the price again, it’s fair to assume that it will look to do more of the same.

Is Mega Millions targeting a richer player base?

On the surface, more than doubling the price of a ticket seems like a drastic move on the part of Mega Millions.

It could turn off some of its core players who can’t afford to purchase the same number of tickets at a new price, as Chartier noted:

“It may sound silly, but $2 is not $5. At some point it does become an economic issue for players. You are used to getting five tickets for $10, now you’re getting two.”

However, Chartier believes that the end goal could be to draw in a more financially sound player. Those are players who don’t tend to participate until jackpots surpass $1 billion.

“I think when it hits the $1 billion mark, things will look very different. The reason I say that is because at the $1 billion mark, part of the reason that we see a winner in one or two drawings at that point is because there are a lot of people who do not enter the lottery until it hits the $1 billion mark. You’re drawing in more of the uncommon players that are willing to take a risk for a greater prize.”

How Mega Millions jackpots work

As it stands now, Mega Millions opens with a $20 million jackpot after someone claims the grand prize. The jackpot then builds with each drawing until someone wins.

Game sales and the annuity factor determine just how much the jackpot grows between drawings. The more sales a drawing does, the greater the next jackpot will be.

The annuity factor is made up of interest rates for securities purchased to fund prize payments. Higher interest rates lead to higher grand prizes.

With higher ticket prices, the belief would be that Mega Millions jackpots would grow more rapidly.

Chartier believes that is the key factor in the decision. Will the price increase keep the jackpots from growing in the early stages to make the move beneficial for Mega Millions, though?

Once the jackpots pass the $1 billion mark, that’s when Chartier sees the rapid growth occurring:

“That’s where I think it will be interesting to see if it does take as long to hit the $1 billion mark. I think that’s where we’ll begin to see that economic factor playing in is that if the average person isn’t necessarily that interested in the lottery (at the $5 ticket). But, when the jackpot hits the $1 billion mark, there’s a sense of entertainment about it, that a richer base of people are more willing to come in and play, and maybe even buy multiple tickets. That’s when we could see some jackpots that we haven’t seen before.”

The highest lottery jackpot ever in the US was a $2.04 billion Powerball drawing in November 2022. The largest Mega Millions jackpot recorded was $1.602 billion last August.

Eight of the 10 largest jackpots in the country’s history have occurred in the last three years. A price increase for Mega Millions would likely contend for the new record in a short amount of time.

What would Mega Millions change mean for Powerball?

A change in price for Mega Millions won’t just impact its game, but also is likely to affect Powerball.

The two games are very similar in style, but have a few slight differences:

Powerball having more frequent draws allows its jackpot to build at a quicker rate.

That could be even quicker if customers are turned off by Mega Millions’ price increase. Those players could opt to invest more in Powerball, according to Chartier:

“I don’t know why a lot of the market would go over to a more expensive one, at least immediately. I don’t know why you would want to pay $5 when a very similar product is being offered at $2.”

Powerball could also be motivated to change its price to counter Mega Millions, but its best move may be to sit tight and let things play out.

“Powerball would be in a position where they can wait and see what happens,” Chartier noted. “Perhaps they see immediate benefits of staying where they are at, or they see the growth rates of Mega Millions improving and decide to do something different.”

Either way, Chartier believes Mega Millions had to do its research in order to feel this move would benefit business in the long run:

“I am sure (Mega Millions) clearly had models that say this would be a good move to make. But, sometimes reality doesn’t match the models.”

Photo by Brynn Anderson / AP