What is a Lottery?
A lottery is an arrangement in which prizes are allocated to one or more people by chance. Often, the prize is a fixed sum of money or goods. Sometimes it is a ticket for the right to participate in a contest with a chance of winning a prize based on a random draw, such as the NBA draft lottery (randomly deciding the order in which teams select their players). Some governments outlaw lotteries, others endorse them and regulate them. Lottery can be used as a way to raise funds for many kinds of purposes, including public schools.
Americans spend over $80 Billion on lotteries every year. That’s more than $600 per household. They could be saving for an emergency fund or paying off their credit card debt instead.
The big message that lotteries are relying on is that playing is fun. That’s why you see billboards on the road with all these huge jackpots. But it’s not that simple. Lottery games are addictive, and they promise the possibility of wealth in a time of inequality and limited social mobility.
Lottery purchases cannot be explained by decision models based on expected value maximization because the tickets cost more than the potential benefits. However, more general models based on utility functions defined on things other than the outcome of the lottery can account for them. Some purchasers play because they enjoy the thrill of gambling, and they indulge in a fantasy of becoming rich. They also want to believe that if they only try hard enough, they will win. Some people create syndicates so that they can buy lots of tickets and increase their chances of winning.