The lottery is an American institution. In 2021 alone, Americans spent upwards of $100 billion on tickets, making it the largest form of gambling in the country. State governments promote the games as ways to raise revenue. But just how meaningful those revenues are, and whether they’re worth the trade-offs to people who lose money, is up for debate.
Buying lottery tickets can’t be accounted for by decision models based on expected value maximization because, as a rule, the ticket costs more than the expected gain (though risk-seeking behavior in general may make purchasing them desirable). However, if the non-monetary entertainment value gained by playing is high enough for someone, the disutility of a monetary loss could be outweighed by the total utility received.
Lotteries are often criticized for being addictive forms of gambling. Though tickets are not usually expensive, costs can rack up over the years, and chances of winning are extremely slim—statistically speaking, you have a greater chance of being struck by lightning or becoming a billionaire than you do of hitting the Powerball jackpot. In addition, winning the lottery can often have negative effects on the quality of life for individuals and families.
Lottery games can take many forms, from a financial lottery where players pay for a ticket and either select numbers or wait for machines to randomly spit out numbers in order to win prizes, to lotteries that give away everything from units in subsidized housing to kindergarten placements at a reputable public school. In the financial lottery, the prize can be a fixed amount of cash or goods. It is more common, however, for the prize to be a percentage of the total receipts.