It's easy to assume that those who buy lottery tickets have no understanding of mathematics, or at least no understanding of probability. These idiots are just letting the allure of a giant jackpot overpower their understanding of the odds. Why would anyone buy a ticket if they knew their chances of winning were infinitesimal?
Well, as it turns out, the gut instinct that motivates lottery players-- "Sure, I have almost no chance of winning, but if I
do win, I could be a millionaire!"-- has a little mathematical support. One of the most useful formulas for everyday decision-making is the Expected Value Formula, pictured below:
In English, the idea is that the expected value of any random variable X (for example, the amount of money you might win from the lottery) can be calculated by multiplying each
possible value of X (you win $5, you win $10, you win $100...) by that possibility's respective
probability (there's a 10% chance of winning $5, a 3% chance of winning $10, a 1% chance of winning $100...) and add all those products together. Even if the chance of winning the jackpot is small, a big enough jackpot can outweigh the cost of participation.
Obviously, it's a little complicated to explain in the abstract, so let's use a simple example.