Frank Daumann, Markus Breuer
May 11, 2016
As well as in most countries the gambling market in Germany is strongly regulated by the federal government. This article focuses on the lottery market as one part which is strongly shaped by the German Lotto-Toto-Block and its products like the standard lotto. By the means of a reference model based on the concept of a market economy it is shown that public intervention can be legitimated because of the existence of negative external effects. Regarding lotteries like any other game of chance these effects are caused by the incidence of compulsive gambling and their negative consequences. A second aspect is reflected by the existence of information lacks. Regarding other forms of market failure like a natural monopoly no impact could be verified. Using a multilevel approach which is able to deal with interventions on both the demand as well as the supply side, we discuss possible interferences by the government to the point of a complete ban of lotteries in Germany. Finally it can be stated that introducing a system providing information about the danger of becoming a pathological gambler to potential consumers is obviously a legitimate intervention on the lottery market. Moreover the introduction of a licence system for suppliers should be used to ensure a sustainable lottery market. In contrast, a continuance of the current state monopoly could not be defined as being compliant to a market economy.