The Definition of a Lottery

A gambling game or method of raising money, as for some public charitable purpose, in which a large number of tickets are sold and a drawing is held for prizes.

The term lottery is also applied to a system for allocating any type of prize, whether or not a ticket has been purchased: “to look upon life as a lottery.” The word may also refer to a particular type of arrangement in which tokens are distributed or sold and the winning ones are selected by chance: “the lottery of life.”

Modern lotteries take several requirements into account in order to satisfy the definition of a gambling type of lottery. In order to meet the standard, payment must be required for a chance of winning (i.e., a wager); the winner must be determined by chance; the size of the prize should be limited to avoid over-incentivizing ticket purchases; costs for organizing and promoting the lottery must be deducted; and a percentage normally goes to profits or revenue (which is often used to promote the next lottery).

The expected utility for a person in making a lottery purchase depends on his or her value system and expectations regarding entertainment and other non-monetary benefits. For some individuals, the entertainment value of a ticket is high enough to outweigh the disutility of a monetary loss; and in these cases the purchase of a lottery ticket may represent a rational choice. However, if a person plays a lottery game frequently and his or her winnings tend to be small, he or she might better allocate resources to other activities that will yield higher returns on investment.