What is Lottery?
A game in which tickets are sold and a drawing is held for prizes. Lottery is a form of gambling and also a way to raise money for state or charitable purposes.
Historically, governments have used lotteries to finance public works projects. In the 1740s, for example, several colonial governments raised money by holding public lotteries to build roads, canals, and churches. Lotteries were also used to finance the foundation of many American colleges, including Princeton and Columbia, during this period.
More recently, lottery plays have become popular for raising funds for a variety of public and private ventures. For example, a company might hold a lottery to select its next chief executive officer or to award scholarships to employees’ children. Many states have legalized and regulate state-sponsored lotteries to raise funds for public works projects, and some private companies also organize their own lotteries to sell products or services.
Americans spend about $80 Billion on the lottery each year, more than $600 per household. This is a huge waste of money that could be better spent on building emergency savings or paying down debt.
Those who buy lottery tickets say they do so because of their dream of becoming rich. But this behavior cannot be explained by decision models based on expected value maximization, because buying tickets costs more than the expected winnings. Instead, it may be explained by risk-seeking or by more general utility functions based on things other than the expected outcome of the lottery ticket purchase.