The March issue of the 2+2 Magazine has an article by Carlos Welch looking at implied odds when set mining.
You can read the full article here:
Not Every Jackpot is a Good Jackpot
Quote:
In my home state of Georgia, the lottery program is running a commercial entitled “Any Jackpot is a Good Jackpot.” It depicts a couple in a scene where the husband comes home to the wife with his head down. He is ashamed that he has played the Mega Millions lottery before the jackpot was allowed to grow. He only won the minimum of $15 million to which his wife naturally reacted with extreme disappointment. She exclaims, “How could you? Only $15 million! I guess we're going to have to cancel the cable.” The sarcastic commercial ends with the punchline, “Any jackpot is a good jackpot.”
Of course, if you understand math then you know that this is not true. A lottery ticket costs $1. The odds of winning the jackpot are roughly 1 to 260 million. This means that if you bought around 260 million tickets at a $1 a pop, you'd likely win the jackpot once. Hopefully, you can see why a $15 million jackpot is a huge ripoff. The minimum jackpot to make this a break even proposition is around $260 million. If it is lower than this, you should not play. Of course, this equation has to be adjusted by the fact that you also have a chance to win one of the smaller prizes, but the same can be said for the fact that you will have to pay a huge chunk of the prize to the IRS. I'm purposely over simplifying the numbers, but keep in mind that the reality is even worse than the example. Even if you are getting the right price, there are negative factors like the possibility of chopping the jackpot that require you to demand an even better than break even price to make this a worthwhile proposition.
A similar situation arises in poker. When we call raises to set mine with a pocket pair, we are essentially buying a lottery ticket. Like the real lottery, this proposition can only be profitable if we mind the math and make sure we are getting a proper price to account for the negative factors. Here are four negative factors that require us to demand a better price when calling to set mine.
