Question

Comment on the Spanish Christmas Lottery, including terms of risk, uncertainty, economic return, etc.

Answer 1

The Spanish Christmas lottery is one of the biggest lotteries that take place. People Participate in huge numbers. The lottery amounts to 2 million euros and as the names suggests it is drawn out during the Christmas week.

The Spanish Christmas lottery like any other event has several angles to it, we shall look at the economic effects of the lottery. There have been a number of individuals that have made a business out of it. The basic selling technique is that higher the number of tickets bought more are the chances of winning it. Since people cannot afford to buy the ticket due to the price, people pool in the money and buy the ticket with the idea to receive the wining price in a percentage equal to their investment.

Researches in the past have shown that there are no sudden or major changes in the GDP or population of the region where most of the lotteries are sold. People who receive the winning amount may reduce the labour supply. Investments may increase slightly based on the decision of investment made by winner and the extent to which the amount is invested.

As far as risk and uncertainty is concerned, the concept of lottery is based on it. Of the thousands of people who invest in buying the tickets, all of these people have the uncertainty of their ticket number being called out. This uncertainty remains until the actual date of the lottery (22nd December). The uncertainty is 1 in a 100,000.

The risk involved is equal to the amount invested. People invest in these lotteries based on the level that they can. For eg. A person invests 25% of the price of the ticket, i.e 25 euros, he is at a risk of 25 euros. Of his ticket is not called for then he loses this investment. However, if his ticket is one of the winning tickets, then he will win 25% of the price money.

Along with this, there are other factors that can also be observed in the lottery. The externalities. The lottery is been seen as an opportunity for social gathering. This requires people to travel from one place to the other. This gives business to local transport, restaurants, eateries and hotels in Madrid where the lottery is conducted every year.

Entrepreneurship get a boost in the province that wins the money. The lottery ticket in most situations is bought by a group of people. When a ticket wins the lottery, the wining price is divided among the people who bought the ticket. The winners may then choose to invest in existing businesses or as found in studies, have new start ups in local areas. This leads to employment generation, increase in demand, rise in disposable income to name a few.