Identify the payout level for instant games by price point that maximized contribution margins.
Mather developed an econometric model using past sales data to measure elasticity of demand to effective price (payout level) for Georgia Lottery instant games. The econometric models included variables for game characteristics, prize structure, lottery operations, macro-economic trends, play styles, and retailer attributes in addition to payout levels. We then applied the price elasticities within a financial model to calculate the effective price, the cost of an instant game to a player after prizes, that maximizes contribution margin at each price point.
Mather recommended payout level changes for six different instant game price points. Under the recommended payout levels, Mather forecasted an annual increase in contribution margin of $8.7MM.