On Totos

Some people are aghast after knowing that I buy Toto, seeing it as a sure sign of my mental degeneration (especially when people know that I failed my Basic Theory Test too). From a rational economist's perspective, buying Toto tickets are irrational. This is because the expected return of any Toto ticket in Singapore is negative. The expected value of your System 7 bet is way below the cost of the ticket. So why do so many people still continue to buy variants of the Toto (e.g. powerball in the US) all around the world?

There is actually quite a bit of economic literature on lotteries out there. People buy lotteries because gambling is fun (Conlisk (1993) and Caplin and Leahy (1998))or they just don't know how bad the odds are stacked against them (Kahneman and Tversky (1979).

For me, the utility of buying Toto is worth the negative expected return. It is a good way of getting rid of my coins and a talk-cock conversation topic with my army buddies. Moreover, it gives me something to look forward to. Time passes faster and life is less miserable. Not to mention a S1.5 million hope too.




Conlisk, J, \The Utility of Gambling," Journal of Risk and Uncertainty, 1993, 5, 255{275.

Caplin, A and John Leahy, \Anticipation, Uncertainty and Time Inconsistency," June
1998.

Kahneman, D and A Tversky, \Prospect Theory: An Analysis of Decision Under Risk,"
Econometrica, 1979, 47, 263{291.