Examination of Witnesses (Questions 264
- 269)
THURSDAY 16 NOVEMBER 2000
PROFESSOR IAN
WALKER AND
MS JULIET
YOUNG
Chairman: Lady and gentleman—you
are the first woman we have had before us this morning—we
are very grateful to you for coming to see us this morning. I
will call Mrs Golding first.
Mrs Golding
264. Could I raise the question of regulation
again. Do you think that the Lottery Commission should, in fact,
regulate itself as well as doing its very best to generate more
money?
(Professor Walker) I think our view is that this product,
lottery tickets, is a product like any other product. People buy
it because they value it. There is not a lot of evidence that
it does any harm. We feel quite strongly that there should be
the opportunity to play games like this because people like to
have fun in this way. There is not a lot of evidence to suggest
that it does much harm but, of course, it is a commodity which
has the characteristics of a natural monopoly, like the supply
of electricity and so on. There are some grounds for thinking
that we should just have one lottery operator and if we have one
operator and that operator is in the private sector then there
is clearly a need for regulation. Whether you would want the regulation
to cover other similar products or not is a hard one to call.
We have separate regulators, for example, for separate forms of
fuels in this country, even though those fuels might well be substitutes
for one another. Whether or not you want the same regulator to
regulate the rest of the industry, I think probably depends upon
the extent to which these products are linked in people's minds.
Now, of course, they are very similar products. We heard a moment
ago that the football pools is essentially a lottery, the vast
majority of people who play it simply buy a season ticket to the
same set of numbers so the extent to which skill is exercised
in playing that particular form of this game is very slim. You
might argue it is a very similar product to the National Lottery
and, therefore, should be subject to the same regulatory restrictions.
265. Could I ask, The People's Lottery proposed
to us that they are considering giving a £10 prize to people
who come up with no numbers as against people who actually get
three numbers.
(Professor Walker) Yes, I noted that point in the
evidence from last week. I meant to go and work out what the odds
of that occurring were but I never got round to it. It seemed
to me that it was not said with a great deal of conviction because
the suggestion was that the prize for not matching any numbers
would be an occasional treat that players would get, and it would
not be a regular prize. Instead of, as Camelot do with their war
chest that they build up over time, they build up a war chest
by not returning 50 per cent of the revenue in prizes instantaneously,
they keep some of it back to use for super draws, so what Camelot
does with this extra revenue is it adds it to the top prize. What
that does is it increases the skewness of the prize distribution.
It makes the game more attractive in the sense that the small
probability of a larger prize becomes more attractive because
the large prize is that much larger. An alternative to using your
war chest for that purpose is to use it to add to smaller prizes,
to prizes which are easier to win. My guess is—I have not
done the sums—not matching any numbers is probably fairly
easy to do. Using your war chest to occasionally reward people
in that way may reduce the skewness in the prize distribution.
One thing that our evidence suggests is that one thing people
like about the game is its long shot characteristic. It offers
a small probability of a very large prize. People like the skewness
in the prize distribution. Actually I think that offering money
for prizes which are that easy to win may not necessarily be the
best use of those resources. It may be better for sales to use
it in some other way or it may be better to simply increase all
the prize pools proportionately instead of giving it back on an
occasional basis.
266. Would you say there will be a problem with
people who play the game going into shops who only played occasionally
having been paid out when they have not got anything, going in
the next week and discovering they are not going to be paid out?
(Professor Walker) I guess there is a possibility
that individuals might misinterpret the treat that they are being
offered and expect it every week and that might lead to disappointment.
267. Trouble.
(Professor Walker) I am not the person to ask because
I am a Lottery virgin. I have never bought a Lottery ticket so
I do not know what makes people do this.
268. Perhaps Ms Young would know?
(Ms Young) I have bought them only once and that was
for research for this work.
(Professor Walker) I actually have touched one once
but only to put it on my scanner to scan into one of my presentations.
Mr Maxton
269. You talked so learnedly about it. I play
the Lottery, I have to say I do not do the Lottery to win £10
but that is neither here nor there.
(Professor Walker) We have an interest in it. My interest
originally started four or five years ago, actually when I was
encouraged to work on this by a former managing director of a
football pools company whom I met on an aeroplane and he told
me about lottery games. I knew nothing about lottery games at
that stage. It sounded an interesting market so I asked the Economics
and Social Research Council whether they would like to fund work
on this new and interesting market and to my amazement they said
yes. Because it is funded by the Research Council, and our research
is not at all funded by the industry, the work has been methodological
in its content, largely. It is blue skies research, as you would
expect the Research Council to fund, but, of course, also, it
has practical applications, that is part of the reason why we
are here.
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