What is a Lottery?

Lottery is a scheme for distributing prizes by chance. The word derives from the Old English lota, Middle French loterie, and English lot; the latter seems to be a calque on Middle Dutch lotinge, and may also be influenced by the Dutch word lotje (literally “fate lottery”). Lotteries have a long history and are widely used. They are a popular form of fundraising, and a means of awarding various prizes in the arts, science, business, government, and health. They are also a common part of the culture of many nations.

The distribution of property and other assets by lot has a very long record, including several instances in the Bible. In the modern sense, it was introduced in Europe by Francis I of France in the 1500s. In the United States, it is a major source of revenue for state governments and is popular with the public.

In the modern sense, a lottery is a game in which tokens are distributed or sold, and the winners are selected by drawing lots. The tokens or entries can be money, goods, services, or even jobs. The winnings are often taxed. In the US, the federal tax rate on Lottery winnings is 24 percent.

The purchase of lottery tickets cannot be accounted for by decision models based on expected value maximization. Rather, people buy tickets for the thrill and fantasy that they might win, or because of other non-monetary benefits. These values are not included in the utility function and therefore lottery purchases can be irrational.