A method of distributing prizes, as for a competition or for public charitable purposes. Usually a form of gambling in which numbered tickets are sold and the winners determined by chance. The prizes may be cash or articles of unequal value. The term is also used for an informal arrangement based on chance, such as an office party or other event at which prizes are awarded to people by chance, rather than on merit.
The lottery is a strange institution in that it has this ugly underbelly of stoking the belief that, well, somebody’s going to win. It’s the sort of thing that leads to all kinds of quote-unquote systems, like buying tickets in groups to increase your chances of winning or buying certain types of ticket at specific stores or times of day. It’s the kind of arrangement that’s often described as irrational, but people still like to play because there is some sort of inextricable human impulse to gamble on something where the odds are long.
Lottery retailers take a commission on each ticket sold and are also paid when a winning ticket is sold. To keep ticket sales robust, states have to pay out a respectable percentage of the total prize money in order to encourage people to buy tickets. That reduces the proportion of the total prize money that is available for state revenues and uses, such as education, but it doesn’t show up in state budgets as a tax. The resulting confusion about the nature of lottery revenues means that the money isn’t as transparent as other types of taxes, and consumers are less likely to be able to assess the fairness of a lottery in terms of its implicit tax rate.