I realize a few commentators gave a nod to this consideration, but I don’t think they realized just how critical it is. An excerpt:
To see the point, suppose the Powerball official jackpot somehow rose to $1.3 trillion, with a lump-sum payout of $806 billion. Running through the same calculations as above, we might get a ballpark gross expected value of one ticket equal to $1,700. That is far higher than the ticket price of $2, making it a no-brainer to play. In fact, in order to eliminate any risk, a hedge fund might devote $585 million to buying every combination of Powerball numbers. It would appear that by spending $585 million on tickets, the hedge fund could guarantee itself the $806 billion lump-sum payout. Who wouldn’t put up $585 million to win a guaranteed $806 billion?
Yet hold on a second. If one particular hedge fund sees this opportunity, why wouldn’t dozens more seize it? Yet it obviously can’t be the case that dozens of hedge funds can all guarantee themselves $806 billion from the same pot of money. In this contrived scenario, what would happen is that the dozens of hedge funds would all buy every combination of Powerball ticket, and so whatever the winning number happened to be, there would be dozens of winners splitting the pot. Realizing this, some of the hedge funds might buy multiple tickets for each possible number…until the point at which it no longer made sense to buy a ticket.