David Forrest of the University of Salford and O. David Gulley of Bentley University examine the efficiency of lottery markets. The authors conclude that lotto players act as if they understand the “rules of the game” and appropriately use relevant information about the games. Exceptions to efficiency are found, but these “inefficiencies” cannot be easily exploited by bettors. John Lepper of Deakin University and Stephen Creigh-
Tyte of Durham Business School provide an historical analysis of the U.K. National Lottery. Although the first National Lottery draw of the modern era occurred in November 1994, state-sponsored lotteries had been common since the reign of Queen Elizabeth I. The authors describe the development of the National Lottery and consider the introduction, nature, and performance of the modern Lottery while also describing the economics of the National Lottery.
Scott Farrow and Chava Carter of the University of Maryland, Baltimore County, assess the costs and benefits of slot machine gambling. This chapter begins by defining the slot machine segment of the gambling industry and then reviews the economics of these machines based on benefit-cost analysis. They also review illustrative empirical studies and provide suggestions for additional research.
introduction xix Kent Grote of Lake Forest College and Victor Matheson of the College of the Holy Cross survey the literature on the economics of lotteries in terms of two central themes. The first section examines the microeconomic aspects of lotteries, including consumer decision-making under uncertainty, price and income elasticities of demand for lottery tickets, cross-price elasticities of lottery tickets to each other and to other gambling products, consumer rationality and gambling, and the efficiency of lottery markets.
The second section covers topics related to public finance and public choice, including the revenue potential of lotteries, the tax efficiency and dead-weight loss of lottery games, the horizontal and vertical equity of lotteries, earmarking and the fungibility of lottery revenues, and individual state decisions to participate in public lotteries. Leighton Vaughan Williams of Nottingham Trent University and David Paton of the University of Nottingham consider the taxation of gambling machines.
Although there has been considerable research on the economic impact of gambling on regional economies in the United States and the United Kingdom, relatively little research has focused on the optimal taxation of gambling machines within these facilities. The authors seek to fill this gap by examining the theoretical arguments for taxing gambling machines by means of a levy on machine takings rather than by means of a licence fee levied per machine. Recent tax debates in the United Kingdom provide an ideal context for such a discussion.