To determine the payout level that maximized net operating margins from instant for a State lottery in the U.S.
Mather developed an econometric model of lottery ticket demand that identified the influence of prize structure, payout amount, game themes, play styles, economic conditions, and other variables on ticket sales. The estimated effect on instant ticket sales due to changes in the payout level were applied in a financial model of direct costs to determine the optimal payout level for instant games by price point in the state.
The Lottery adjusted payout levels by price point for instant games based on the findings from the model. The results of this analysis have also been used to estimate the optimal prize structure for lottery games to maximize operating margins.