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by Commander Tansin A. Darcos 05/18/2013, 10:05pm PDT |
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There could be any number of reasons. First, the net amount of money is more, and notwithstanding the time value of money most of us couldn't spend all of a huge payout over the time frame involved, and thus might end up, over the time frame - about 20 years - actually with more in total. You might also know you're the type who can't manage money properly and realize you're better off not having all of it all at once and end up wasting it, whereas worst case, if you mess up you've just messed up for one year rather than pissed away the entire amount. You might be able to arrange things with a smaller amount of money to pay less in taxes than if it's a huge amount.
Then again, if you could think about money properly you'd realize that lotteries are a sucker bet in the first place. You may find this hard to believe but I have never bought a lottery ticket. Not scratch off, not instant win, not lotto, not anything, no matter what the payout is or how high it's gone. As an agnostic I've always followed the example of God in the Bible, They never bet on anything unless They are certain to win. Nobody who knows me will ever take a bet I've offered because they know they will lose.
It's basically a marketing gimmick. Did you know that Publisher's Clearing House offers the winner the choice of a house or the money, and I haven't seen their current offering because I've moved and they never send me any mailings, but I think they also offer a house and some money with it? I've bought stuff from Publisher's Clearing House, not because of the contest - in fact, because of lawsuits by government agencies they've had to use a third party to comply with lottery laws because they weren't complying with the rules that say that you can't make winning conditional on purchasing anything - but because they had some things I was interested in, and the prices were in line with what I would expect even with shipping costs.
But, despite the fact that no one has ever taken advantage of the house option from Publisher's Clearing House, they have found that offering houses increases their response rate over just offering the cash windfall. So they also do research on which house offerings draw better.
So I suspect research shows that offering the option of a bigger payout gets more responses. Actually, I think it's also marketing. They don't mention that the total jackpot is before taxes, and is based on the annuity payout rather than the lump sum. This allows them to legally advertise a total amount which is about twice as big as the lump sum after taxes by using the time value of money.
If they told you that the amount you'd get is $10 million, it might not excite you. Not mention that the amount is after taxes - which are automatically taken out and you can't avoid them - and now you can claim it's $13 million. Now, instead, you mention in the fine print, that the total payout is based on a 20-year annuity, then you can claim it's $26 million. On top of the automatic 30% increase (or more depending on state taxes) you get to tack on because of automatic non-avoidable pre-payment collection, your advertising can now legally double the amount you can claim as the size of the jackpot that someone normally collects since no one takes the 20-year annuity. Now, if you actually did take it over 20 years, you would end up getting the $20 million, at the rate of $1 million a year over 20 years. So legally they are being technically accurate even if nobody takes that option.
Bought hard drives lately? Bought computer memory lately? Hard drive manufacturers measure capacity as a factor of 1000, memory manufacturers measure capacity as a factor of 1024. So, that means that if you had 3 terabytes of memory in a computing frame, it would be 3*1024^4, while 3 terabytes of disk space is 3*1000^4. And the hard drive manufacturers explicitly say in the fine print that they count a gigabyte as 1 billion bytes and a terabyte as 1 trillion bytes. Didn't matter much when hard drives were measured in megabytes since it only meant the drive was 24K less per megabyte, but at the terabyte level it's about 60 gigabytes less. But they do admit - in the fine print - how they are counting and are consistent so the big print that claims it's a 3 terabyte drive even if the small print points out it's 3 billion bytes, so they can use marketing to make drives seem bigger than they are.
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