A lottery is an arrangement in which prize money (and perhaps other goods and services) is allocated by a process that relies entirely on chance. Some examples of such arrangements include a lottery for units in a subsidized housing block or kindergarten placements at a prestigious public school. Others are more obviously lotteries in the sense that participants pay money for a ticket and then have a chance to win a big cash prize.

Although the idea of a lottery has roots in ancient times, the first state-sponsored lotteries began in the United States in the 1820s as a way to raise revenue for various social projects. Many of these lotteries were controversial, because people perceived them as a hidden tax on the poor. They also fueled the popular belief that lotteries were unreliable.

The purchase of a lottery ticket cannot be accounted for by decision models based on expected value maximization, because lottery tickets cost more than the potential gain. However, other models based on risk-seeking behavior and on utility functions defined on things other than the lottery outcomes can account for this type of choice.

While a large jackpot drives lottery sales, it is not enough to justify the expense of purchasing a ticket. A more effective strategy would be to cap the jackpot at a lower level than the current one. This might reduce ticket purchases by making the jackpot less newsworthy, but it might increase the number of winners and thus the total amount of prize money awarded.