Lottery Basics



A lottery is a type of game in which money is staked on the chance of winning prizes. A number of factors affect the probability that a bettor will win, including the amount of money staked, the type of lottery ticket purchased, and the lottery organization’s ability to determine whether the ticket was among those selected in a drawing.

State-sponsored lotteries are a common means of raising money for public projects. They have been used to finance many important public works, such as roads, libraries, churches, colleges, canals, and bridges in the United States and the United Kingdom.

They are also popular with sports franchises and other companies that provide prize-winning products as part of merchandising deals. For example, New Jersey’s Lottery Commission recently partnered with Harley-Davidson to offer a scratch game in which the top prize was a motorcycle.

Profits for the State – Table 7.2 shows how the profits for each state’s lottery have been allocated since its inception to various beneficiaries, including education, the elderly, and health care. In the United States, New York topped the list with $30 billion in profits allocated to education; California followed closely behind with $18.5 billion and New Jersey with $15.6 billion.

Although lottery purchases cannot be accounted for by decision models based on expected value maximization, they are a form of risk-seeking behavior that can be attributed to the appeal of the game’s prizes. Alternatively, decision models based on utility functions defined on things other than the lottery outcomes can account for the purchase of lottery tickets.