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MathExtremist
MathExtremist
Joined: Aug 31, 2010
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October 13th, 2010 at 1:20:39 PM permalink
Quote: superrick

When playing craps and the PL with odds is it a miss understanding that after the point has been established that your odds are still 1.47%. Wouldn稚 the odds now reflect the odds on the point that was established?

So if the point was a 10 you would be looking at the 6.67% for making the point and the PL bet now has nothing to do with the bet other then the fact that you are going to get paid even money for that part of your bet?



The passline is a contract bet so it doesn't matter. The bet has an EV of -1.41% when booked. Looking at what happens after you make it but before it's over is basically like watching a horse race. It can be exciting, and sometimes you know your horse isn't going to win, but you still can't bet on the race after it starts.

To use your example, if the point was 10 the conditional probability of winning is 1/3. If you wanted to compute a conditional EV, it would be -33.33%. However, you're not just making an even-money bet on 10 vs 7 so you don't have an unconditional -33.33% EV (that's called a put bet). For the passline, you have to consider the likelihood of getting that 10 in the first place, which is only 3/36. The rest of the time the bet has a different conditional EV after the first roll (either +100% for 7/11, -100% for craps, or either -33.33%, -20%, or -9.1% if you establish a point).

When you add them all up weighted by likelihood, the result is -1.41%.
"In my own case, when it seemed to me after a long illness that death was close at hand, I found no little solace in playing constantly at dice." -- Girolamo Cardano, 1563
DJTeddyBear
DJTeddyBear
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October 13th, 2010 at 1:25:45 PM permalink
Quote: soulhunt79

Isn't the annuity just whatever the jackpot is? Say, 200 million. I thought that was just split up according to the terms of the annuity.

If the lottery is indeed putting the 32.5 cents away for every ticket, the 200 million jackpot is in a bank account somewhere at the time the jackpot is won. The lottery pays people their money monthly and the lottery gets all the interest for that money sitting there in a bank.

You'd think so, but if that were the case, why is the lump sum option so much less? It's because the lump sum is the actual collections that will be put into the annuity account if you choose annuity payments.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁
thecesspit
thecesspit
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October 13th, 2010 at 1:26:11 PM permalink
Quote: Doc

Yes, I agree. It is just that the amount required to "fully fund" the annuity is far less than the payments that will be made over the term of the annuity. The full-funding amount is what is offered as an optional lump sum payment.



Which is less than the jackpot advertised. So where does the extra money go?

Or was there never $1 million, just enough to create a $50k, 20 year annuity?
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
Doc
Doc
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October 13th, 2010 at 1:31:43 PM permalink
Quote: soulhunt79

Isn't the annuity just whatever the jackpot is? Say, 200 million. I thought that was just split up according to the terms of the annuity.

If the lottery is indeed putting the 32.5 cents away for every ticket, the 200 million jackpot is in a bank account somewhere at the time the jackpot is won. The lottery pays people their money monthly and the lottery gets all the interest for that money sitting there in a bank.

No. The advertised jackpot is an estimate of the total amount of the annuity payments. It is based on the amount of any rollover from previous weeks, an assumption of a single winner, an estimate of the number of tickets to be sold, the portion of sales allocated to the jackpot fund, and the expected pricing of a long-term annuity with the specified pattern of payments.

If they advertise a $200 million (estimated) jackpot, there is no where close to $200 million on hand. They expect to have a major portion of that $200 million earned via the annuity fund manager investing the money that is on hand at the time the lottery is won. Both the fund manager and the lottery corporation are making a commitment that the funds will be available for each of the annual payments. If you choose the immediate lump sum payment instead, then you get the smaller amount that they actually have on hand right then, and it's up to you to invest, spend, gamble away, whatever.

You owe taxes either way. If you take the annuity, you will likely pay a higher total amount of taxes (unless you have a very creative accountant) because you will receive more total money. But you will receive the money and pay those taxes over decades, probably at a lower tax rate too because you will receive less in each tax year, so it is generally a better financial option to take the annuity.

Edit: Sorry. the previous two posts were entered while I was plodding away at the keyboard. If my explanation doesn't cover it all, please ask again, and I will try to fill in/clarify.
soulhunt79
soulhunt79
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October 13th, 2010 at 2:10:20 PM permalink
Quote: DJTeddyBear

You'd think so, but if that were the case, why is the lump sum option so much less? It's because the lump sum is the actual collections that will be put into the annuity account if you choose annuity payments.



Well the lump sum is less because it had to be less. You can't offer 100 million now and 100 million over 20 years. Noone in their right mind would take it.



I'd be curious to know what the margins and costs are for actually running the lottery then. It just surprises me that 67.5% of the money brought in isn't enough to pay the bills + all winners minus the jackpot.
Doc
Doc
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October 13th, 2010 at 2:22:56 PM permalink
Quote: soulhunt79

...I'd be curious to know what the margins and costs are for actually running the lottery then. It just surprises me that 67.5% of the money brought in isn't enough to pay the bills + all winners minus the jackpot.

For that kind of info, you should probably check the web site of the particular state's lottery. I live in North Carolina. The following quote is from the North Carolina Education Lottery web site.
Quote:

The State Lottery Act, in order to increase and maximize the available revenues for education purposes, prescribes the following guidelines as to how each lottery dollar will be spent which are to be adhered to the extent practicable. Retailers receive a 7% commission for selling tickets. Up to 8% may be spent on administration. At least 50% will be paid out in prizes and as nearly as practicable 35% will be transferred to the Education Lottery Fund at the Office of State Budget and Management. 100% of the net proceeds of the North Carolina Education Lottery go to education programs.

The web site also has links to financial reports for the past few years. I think there are links or FAQs telling how specific lottery games allocate the payout amounts between jackpots and other specific winning tickets.

I guess I am not clear what you mean about "67.5% of the money brought in isn't enough to pay the bills + all winners minus the jackpot."
SanchoPanza
SanchoPanza
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October 13th, 2010 at 2:35:44 PM permalink
Quote: superrick
When playing craps and the PL with odds is it a miss understanding that after the point has been established that your odds are still 1.47%. Wouldn稚 the odds now reflect the odds on the point that was established?

So if the point was a 10 you would be looking at the 6.67% for making the point and the PL bet now has nothing to do with the bet other then the fact that you are going to get paid even money for that part of your bet?
-----
Such a basic misunderstanding of what a simple pass line bet means raises the question of whether the poster intentionally omitted the comeout from his argument, he is unable to comprehend it or he is trolling.

Past comments include:

"You both lose the right betters and the wrong betters, can lose at about the same rate if the tables are choppy!
For the wrong players they have to get pass the come-out rolls and just how many times do you see where the seven is killing both sides?"

and

"By betting your PL bet you locked your options, the only way you can win is for the point to be made again; did you forget what you are trying to tell me about the advantage, because the 7 was going to be made on the come out roll? What changed is the roll going on forever now that the point was established, or will the math of the game bite you in your butt when the 7 is made 4 rolls after the point was established?"
soulhunt79
soulhunt79
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October 13th, 2010 at 2:59:59 PM permalink
Quote: Doc


I guess I am not clear what you mean about "67.5% of the money brought in isn't enough to pay the bills + all winners minus the jackpot."



It was simply the purchase money minus the jackpot which for powerball seems to be 32.5%.

100% - Total purchases
32.5% - Jackpot payout according to powerball
14% - Payout to all other winners in powerball
15% - Store fees and Admin costs from your quote

That still leaves like 38% of the money left and this is assuming they are funding the entire annuity up front.


Not sure if it was clear or not before but I'm also treating the lottery as a closed system. While I know it does pay for things like education, once it leaves the lottery system I consider it just random government money. My assumptions were based on the idea that if nothing was removed for non lottery operations there would be enough money from just the purchases of tickets to pay off an entire annuity the moment a jackpot is won. I'm struggling to come up with ways they spend the extra 38%, let alone come up with ways they spend more and have to dip into the 32.5% I set away for the jackpot.
Doc
Doc
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October 13th, 2010 at 3:26:09 PM permalink
Well, yes, I suppose that theoretically they could pay out another "38%" or so. But then there would not be any purpose for the state to be operating a lottery, other than perhaps to entertain the players, and that just wouldn't fly.

State lotteries have a higher "house advantage" than any of the games in a regular casino, with keno being the only thing that even comes close, I think. But this major hold out, or "profit" is what enabled the laws to be enacted. Each state has specific purposes designated for these proceeds, and education is a very common destination for the funds. The intent is either to improve the education (or other) functions or to reduce the load on the taxpayers that previously funded these public activities. There is no claim that they offer the players a particularly good wager -- it's just for the "fun" of playing. :-)
appistappis
appistappis
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October 13th, 2010 at 3:45:54 PM permalink
wiz, have you ever come up with how the house edge in tiles can be lowered if you know where the four teens and days are???????????

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