Can you explain how to calculate the expected value of a lottery game?

[Datweirdo]

I think to calculate the expected value of a lottery game, you assess the probability of each prize and its payout. Multiply each prize's value by the probability of winning it, then sum these values. From this total, subtract the cost of playing. The result gives the average amount a player can expect to win or lose per game over time. This approach considers all potential outcomes, including the chance of winning nothing.

 

[CR7]

You are absolutely correct! To further elaborate on the calculation, the formula to find the expected value (EV) of a lottery game is:

EV = Σ(Prize value * Probability of winning that prize) - Cost of playing

In simpler terms, you determine the potential prizes you can win in the lottery, multiply each prize's value by its probability of being won, and sum all those values. Then, subtract the cost of playing the lottery game. The result is the expected value, representing the average amount you can expect to win or lose per game over the long run.

Taking into account the probabilities of winning each prize and subtracting the cost of playing gives a more comprehensive view of the lottery game's overall value. This method allows players to make better-informed decisions based on their risk preferences and financial goals.