What do you get when you cross grassroots community development with degenerate gambling? In Atlantic Canada, you get “Chase the Ace,” a clever twist on the ubiquitous 50/50 draw.

It’s all over the news here in the Maritimes at the moment, because a Chase the Ace fundraiser in Goulds, Newfoundland just produced a $2.6 million dollar payday for one lucky couple, and even greater profit for the local parish which organized it.

Improving on a classic

The 50/50 draw is about the simplest possible gambling-for-charity concept you could come up with. If you’re somehow not familiar with the concept, it works like this: The charity or organization trying to raise funds distributes tickets in return for donations, either at a fixed rate, or perhaps offering a more favorable rate for larger donations. One ticket is then drawn, and the total money collected is split two ways between the organization and the winner of the draw.

It works well enough, and needs little explanation. If the goal is to maximize donations, however, anyone working in the gambling industry can tell you that it’s lacking in a few ways. With just a single draw and one winner, there’s no chance to build suspense, for one thing, and far more people experiencing disappointment than excitement. Also, the size of the prize depends entirely on the number of tickets sold, so there’s no big, known sum to publicize to draw players in.

To improve on the 50/50 draw, it’s natural to look to casino gambling for inspiration, turning the industry’s cynical psychological tricks to a positive cause. The mechanism chosen by the creators of Chase the Ace is the progressive jackpot.

Let the chase begin

The idea actually originated in Inuvik, in Canada’s Northwest Territories, but was copied by the town of Noel, Nova Scotia in 2013 and has since taken off throughout the province, plus New Brunswick, Prince Edward Island and Newfoundland.

As with a 50/50 draw, tickets are given out in exchange for donations, and half the money is kept by the organizers for a charitable or community cause – in Noel, for instance, the idea was to raise money to install floodlights for the local ball field. Rather than paying out the other half as a single prize, however, it’s split in some way (often 20/30) between a nightly prize and a contribution to a jackpot.

The winner of the draw receives the nightly prize, then gets a shot at the jackpot by drawing a single card from a standard deck. Pull the Ace of Spades, win the jackpot. Pull any other card, however, and it stays for the next draw. Unlike a 50/50 draw, which is typically a one-off affair, Chase the Ace is repeated at regular intervals – usually weekly – until the jackpot goes off. One important rule is that non-winning cards drawn are not returned to the deck. So, not only does the jackpot grow from week to week, but so too do the odds of having it go off.

Explosive growth

The most obvious difference between Chase the Ace and a 50/50 draw is that it’s a really awful deal for those participating in the first draw. The chances of drawing the Ace are less than 2%, and the jackpot is scarcely larger than the nightly prize, so those buying tickets for that first draw are, statistically speaking, losing almost 80% of their money on average. That’s okay when the draw is for a good cause, however, because there are presumably people who’d be willing to donate even with no chance at a prize.

As the deck thins and the jackpot grows, this changes. Half of the time, the game should still be running with half the deck gone. At that point, the odds of pulling the Ace have doubled, and the jackpot has been accumulating for six months. At that point, even with $1 or $2 tickets, the jackpot is likely to be running into the tens or even hundreds of thousands of dollars.

The nature of progressive jackpots is that later participants benefit from better expected profit (or, rather, smaller expected losses), subsidized by those who accepted worse odds early on. Naturally, as the game goes on, it becomes more appealing and draws in more participants… and this, in turn, means the jackpot grows even faster.

This is how small communities like Goulds can end up collecting – and paying out – millions of dollars through what begins as a small community initiative running out of a local church, community centre or pub.

Of course, the nature of the game is that it’s unpredictable how long it will go. It’s possible that the Ace gets pulled within the first few weeks and the game is over before much money has been raised. In this case, though, the organizers can simply try again.

Out of control jackpots

It’s in some ways a larger problem when the game goes on too long. It’s theoretically possible for the game to last a full year before the Ace is the only card remaining and the jackpot is guaranteed. In practice, however, government has to step in and force an end to the game before then. The $2.6 million prize which developed in Goulds came 44 weeks in: By that point, the weekly event was creating bumper-to-bumper traffic in the surrounding area, ticket lines stretching for blocks, and logistical problems surrounding things like securing enough portable toilets for the size of crowd.

At that point, the jackpot was growing so rapidly that further weeks would have been entirely unmanageable; in this case, the procedure is to announce that a given week will be the final one, and that multiple draws will be held on the same night, with chunks of the jackpot being given out as consolation prizes for each losing card, until the Ace is found and the remaining jackpot paid out.

Even before this point, smaller challenges present themselves, though now there are generally policies in place to handle them, agreed upon by organizers in advance. For instance, once a jackpot grows beyond a certain size, organizers are required to hire an accountant to handle the money, and staff to direct parking.

Philanthropy and entertainment

The chance for a snowballing jackpot and consequent huge fundraising potential is the fundamental appeal of Chase the Ace, and it’s unlikely that many participants or organizers think much more carefully about it than that. Intentional or not, however, there’s something quite interesting going on with the underlying economics.

When gambling is combined with fundraising, the value proposition is best understood by splitting the money exchanged in two: The person participating is simultaneously making a straightforward donation of some amount, and getting an opportunity to gamble money at even odds for recreational purposes. This is easy to see in the typical 50/50 draw; if someone buys a $1 ticket, it is exactly equivalent to donating 50 cents to the cause, and entering a separate lottery (which pays out the full money collected) for the other 50 cents.

In Chase the Ace, there’s a lower bound to the expected value for participants, which is that offered to those who buy tickets in the first draw. If 20% of the collected money goes to the nightly prize, then even in the absence of a jackpot, the proposition is a 20-cent participation in a lottery for every 80 cents donated.

The jackpot changes the odds, however, and therefore the effective amount of money being wagered. If, on top of the chance at the nightly prize, a $1 ticket has a one-in-10,000 chance at a $1000 jackpot, then there’s an additional 10 cents in expected value; the purchase then equates to a 70-cent donation and a 30-cent gamble.

Hypothetically, if the jackpot grows large enough and attendance is small enough, there could even be Chase the Ace draws for which a ticket purchase is statistically profitable and the effective donation is negative. Under normal circumstances, however, this should not happen, because the odds decline as more participants enter, and it should not be hard to find willing participants so long as the gamble is profitable.

To appreciate the genius of Chase the Ace, a little digression into economic theory is required.

Price discrimination

Price discrimination,” in economics and business, is the act of selling a good or service at a different rate depending on who is buying, and when, and in what context. That sounds like a bad thing, given what “discrimination” usually means in common parlance, but we’re not talking about charging more or less to people based on arbitrary social distinctions like race or gender.

Rather, price discrimination is related to the idea of economic efficiency. Economists see equilibria as the key to a healthy economy, where a seller is essentially indifferent between selling to one buyer or another, and a buyer is indifferent between one product and another.

If the price for a thing is fixed, then some people are getting it for less than they’d be willing to pay, while others who’d be willing to pay a price greater than the production cost are unable to do so. Under ideal price discrimination, everyone would be paying exactly as much as the thing is worth to them, and no one is being priced out unless they value the thing less than it costs to produce.

The philanthropy sweet spot

The fact that 50/50 draws do better than straightforward funding drives is testament to the fact that people like to gamble, even when they know it’s a losing proposition. That 50/50 ratio is essentially arbitrary, however. Organizers could theoretically run a draw with a more or less generous split and presumably get more or less participation as a result.

As I said earlier, for the first draw in a Chase the Ace game, every dollar spent equates to roughly 80 cents donated, and 20 cents in prize pool equity for the purchaser. As such, the only people who will participate are those sufficiently sympathetic to the cause that they’d pretty much be willing to simply donate without the gambling incentive.

As the equity being laid by the jackpot increases, that ratio shifts, capturing new participants in the process. Each week, the turnout should include people who are relatively less sympathetic to the cause and/or enjoy gambling relatively more than those who turned out the previous week.

Figuring out exactly how the donation-equity split should evolve over time is above my pay grade, but since the organizers always end up claiming 50% of the money collected for the cause, it has to average out to 50/50 in the long run. And since the early draws offer considerably worse odds, it’s obvious that when the game runs long enough, the odds should at some point become better than 50/50.

That means, then, that Chase the Ace isn’t just a fun gimmick, but actually a more efficient way of collecting donations than a simple 50/50 draw. The way the proposition evolves from week to week is effective as a means of price discrimination, maximizing donations from those who care more about the cause than the prize, while eventually drawing in those who would pass on a 50/50 draw, provided the Ace remains in the deck long enough.

Alex Weldon (@benefactumgames) is a freelance writer, game designer and semipro poker player from Dartmouth, Nova Scotia, Canada.