One way to explain lottery tickets is to hypothesize that people don't typically process small probabilities well. So Radon looks like terrorist attacks looks like lightening. What people seem to do in practice is to lump all small probabilities into either one quantity that means "small but worth paying paying attention to" and zero.
This decision making process works pretty well for day-to-day life, but it can get frustrated when the outcomes are very large, usually dying and big money. So some lottery players approximate the chances of winning to be zero and don't buy; others approximate small probability and get a large expected value of a ticket and buy many.
On the topic of terrorism and small probabilities, over 40,000 people die in car crashes per year in this country. It's essentially as if 9/11 has been happening every month for decades on our roads. But which do people care more about?
I am sure that most people don't get the probabilities right, but maybe there is also something else: if you factor the utility into the equation, the probabilities might not be so bad? E(money) < 0, but E(utility) > 0? As the other reply sad, people get a rush out of gambling, among other things.
Comments
One way to explain lottery tickets is to hypothesize that people don't typically process small probabilities well. So Radon looks like terrorist attacks looks like lightening. What people seem to do in practice is to lump all small probabilities into either one quantity that means "small but worth paying paying attention to" and zero.
This decision making process works pretty well for day-to-day life, but it can get frustrated when the outcomes are very large, usually dying and big money. So some lottery players approximate the chances of winning to be zero and don't buy; others approximate small probability and get a large expected value of a ticket and buy many.
This is actually proven to be true.
On the topic of terrorism and small probabilities, over 40,000 people die in car crashes per year in this country. It's essentially as if 9/11 has been happening every month for decades on our roads. But which do people care more about?
I am sure that most people don't get the probabilities right, but maybe there is also something else: if you factor the utility into the equation, the probabilities might not be so bad? E(money) < 0, but E(utility) > 0? As the other reply sad, people get a rush out of gambling, among other things.