Learning from Competition in Lottery Adoption

• In Event: Policy Diffusion in the United States

Abstract

During the last three decades, a considerable portion of research has been dedicated to understanding policy diffusion phenomena. While early policy diffusion studies contributed to finding empirical evidence of the existence of policy diffusion (Gray, 1973; Walker, 1969), recent studies rather attempted to discover the underlying mechanisms for why diffusion takes place (Grupp & Richards, 1975; Mintrom, 1997). After Berry and Berry (1990) pioneered the use of Event History Analysis (EHA) to study the diffusion of lottery programs, diffusion studies grew in popularity with more methodological rigor in identifying what brings about policy diffusions over the last two decades (Gilardi, 2010; Mintrom, 1997; Shipan & Volden, 2006; 2008). Now, literature on policy diffusion demonstrate that there are four general mechanisms of policy diffusion: Imitation, learning, competition, and coercion (Karch, 2007; Shipan & Volden, 2008).
However, separating the effects of different mechanisms from one another is difficult (Shipan & Volden, 2008) because they often function together to boost the diffusion of policies in a complementary manner rather than exclusive. For example, when a neighboring state starts selling lotteries to the residents, this certainly provides an opportunity for other states to learn how much revenue can be made from their residents by adopting the lottery policy – learning. Then, other non-adopting states will soon have strong motives to adopt lotteries to have the same revenues from the residents. This will, in turn, increase the likelihood that other states adopt lotteries.
In lottery adoption, the revenues would come not only from the residents of the adopting state but also from the residents of neighboring states who live near the border (Baybeck et al., 2011). Therefore, neighboring state’s lottery adoption affects other states’ potential benefits and loss when the other states would adopt the lottery. For this reason, states have motives to compete with one another not to lose their potential lottery consumers to their neighboring states and/or to attract the consumers from the neighboring states – competition. As such, the learning mechanism can cause inter-state competition.
In a similar vein, we argue that competition also causes learning in policy diffusion. If a state was unsuccessful in attracting consumers from neighboring states, or to keep their residents from buying the lottery from neighboring states, then a non-adopting state has the chance to observe and learn from the ongoing competition – learning from others’ competition. Thus, if a non-adopting state observes that newly adopting states are more likely to fail then they will be less prone to consider adopting a lottery.
In this scenario, we can expect that different diffusion mechanisms – learning and competition – can come together at different stages of policy diffusion to complement one another. Regarding this phenomenon, Volden (2002) once argued that “states wish to increase their welfare benefit levels, but they are reluctant until other states do the same” (p. 352). His assertion suggests that policy adoption can take place when states observe how other states compete with each other for policy adoption. However, there has been little research done on such a possible mechanism or, at least, combinations between different diffusion mechanisms.
To fill this lacuna, we attempt to demonstrate how one diffusion mechanism can cause another mechanism. In particular, we assess how states learn from other states’ competitions using event history analysis with a specific case of state lottery adoptions in the United States from 1970 through 2010. We first estimate the worthiness of adopting lottery policy for each state when its neighboring state already adopted the policy – worthiness of entering competition. Then, we demonstrate how the worth of entering the competition (i.e., adopting the lottery policy) affects the likelihoods of the rest of the neighboring states’ policy adoptions. Ultimately, we find that worthiness of entering competition significantly affects neighboring states’ decisions of the policy adoption. States learn not only from how other states are successful in their policy outcomes but also from observing how they compete with one another.

Authors

• Namhoon Ki, FSU Public Administration and Policy dept

• Jeffrey Vincent Swanson, Florida State University