How the Lottery Works

In a lottery, prizes are assigned by chance. Prize money is often a percentage of sales, with additional funds deducted for costs of organizing and promoting the lottery, taxes, or other revenues. Some lotteries balance a few large prizes with many smaller ones; others, especially those in the United States, have more small prizes. The size of a prize and the frequency with which it is awarded are important factors for determining how much revenue a lottery generates.

Since New Hampshire inaugurated the modern era of state lotteries in 1964, virtually all lotteries have followed remarkably similar patterns: the legislature legitimizes a monopoly for itself; establishes an agency or public corporation to run it (as opposed to licensing a private firm and allowing it to collect a portion of the profits); begins with a modest number of relatively simple games; and, under pressure to raise revenues, progressively expands its operations, particularly through the introduction of new games.

Lotteries have a wide appeal to the general public, but their popularity is also dependent on how much the game is played by specific socio-economic groups: men play more than women; blacks and Hispanics play more than whites; and those with lower income levels tend to play less (although they play just as frequently as those with higher incomes). Consequently, lotteries are able to maintain their profitability by promoting themselves to a range of broad constituencies, from convenience store operators and lottery suppliers to teachers and other government employees whose salaries have been “earmarked” for use in the lottery’s programs.