1. A gambling game or method of raising money in which a number of tickets are sold and the winners are selected by random drawing for prizes. Some governments outlaw lotteries, while others endorse them to the extent of organizing a national or state lottery. Modern lotteries of this type can also be found in commercial promotions in which property is given away by a random procedure, in military conscription, and even in the selection of members of a jury. The name is derived from the Dutch noun lot, meaning “fate.”
2. The distribution of property or other goods or services by chance, as in a drawing for them: He cast his lot with the other applicants and won the house. 3. A chance event or happening: The winnings in the lottery were a big surprise.
A lottery is a form of gambling in which a prize, usually money, is won by selecting a number or other symbol in a draw. The word derives from the Dutch noun lot, which means fate or fortune: The winnings in the lottery were destined to be a big surprise.
Governments often organize lotteries to raise funds for a variety of public purposes. In fact, lotteries have been around for centuries, and are considered a painless form of taxation by many people. In the United States, for example, the state-owned Staatsloterij is the oldest running lottery, founded in 1726.
While lottery purchases can’t be accounted for by decision models based on expected value maximization, they can be explained by other considerations. For instance, the ticket provides entertainment value that may outweigh the disutility of a monetary loss, especially for people with low-incomes who can’t afford to pay other types of taxes.
Another important factor in determining whether to purchase a lottery ticket is the perceived probability of winning. If the chances of winning are very high, as in a large jackpot prize, the ticket is more likely to be purchased. However, if the odds of winning are much lower, as in the case of the small weekly prizes in some state-run lotteries, the ticket is less likely to be purchased.
In some countries, including the United States, the winner of a lottery can choose between receiving the prize as an annuity or as a lump sum. The choice of one option or the other has significant implications for taxation, since winnings are usually subject to income and sales taxes as well as lottery taxes. Moreover, an annuity payout typically results in a smaller amount than the advertised prize after the application of withholdings and income taxes. The United States, for example, withholds 24 percent of the jackpot winnings before paying them out. This reduces the winnings to about half of the advertised prize. The withholding percentage can vary by country. For a large prize, the effect can be quite substantial. For this reason, most winnings are received in the form of a lump sum rather than an annuity.