Gambling on Lotto Numbers: Testing for Substitutability or Complementarity using Semi-weekly Turnover Data

JEL Classification L83, D12, D81

Catriona Purfield and Patrick Waldron

Department of Economics, Trinity College, Dublin 2, Ireland.

Abstract

The impact on demand for a gambling product of the introduction of a competing product is a topical issue in Britain, Ireland and elsewhere. We consider empirically the demand for Lotto itself and for fixed-odds betting on Lotto draw. The evidence suggests that these products are complements. Problems are posed by the need to rely on turnover data instead of price and quantity data in testing for substitutability or complementarity and by the semi-weekly nature of Lotto draws, which prompts the use of a new test for the possible presence of a negative unit root in turnover series.

Acknowledgements

We are extremely grateful to the Allied Betting Shops Association and its member firms and to An Post National Lottery Company, Ireland for giving us access to their turnover data. We would also like to thank our colleagues John Fingleton, Michael Harrison, Antoin Murphy and John O'Hagan and seminar participants at Trinity College and at the Irish Economics Association Annual Congress held at Dromoland Castle in April 1996 for their advice and comments. Catriona Purfield would like to thank the Royal Irish Academy which awarded a postgraduate essay prize to the preliminary research.