Lotteries

A lottery is a popular form of gambling which involves the drawing of lots for a prize. Some governments forbid it, while others endorse it to the extent of organizing a national lottery. It is common to find some degree of regulation of lottery by governments. The first signs of a lottery trace back to Asia, where ancient Keno slips were discovered. First played in China, the lottery has helped finance major governmental projects like the Great Wall of China.

Lotteries come in many formats. The prize can be fixed cash or goods. In this format there is risk to the organizer if insufficient tickets are sold. The prize can be a fixed percentage of the receipts. A popular form of this is the "50-50" draw where the organizers promise that the prize will be 50% of the revenue. The prize may be guaranteed to be unique where each ticket sold has a unique number. Many recent lotteries allow purchasers to select the numbers on the lottery ticket resulting in the possibility of multiple winners.

Lotteries are most often run by governments or local states and are sometimes described as a regressive tax, since those most likely to buy tickets will typically be the less affluent members of a society. The astronomically high odds against winning have also led to the epithets of a "tax on stupidity" or "math tax." The phrase is largely rhetorical (playing the lottery is voluntary; taxes are not), but it is intended to suggest that lotteries are governmental revenue-raising mechanisms that will attract only those consumers who fail to see that the game is a very bad deal. Indeed, the desire of lottery operators to guarantee themselves a profit requires that a lottery ticket be worth substantially less than what it costs to buy. After taking into account the present value of the lottery prize as a single lump sum cash payment, the impact of any taxes that might apply, and the likelihood of having to share the prize with other winners, it is not uncommon to find that a ticket for a typical major lottery is worth less than one third of its purchase price.

The fact that lotteries are commonly played leads to some contradictions against standard models economic rationality. However, the goal of some players may not be to win the game, but merely to have a thrill and indulge in a fantasy of possibly becoming wealthy. This is particularly popular among those who believe their chances of becoming rich are already zero, so even if the lottery's odds are awful, they are better than zero.