Throughout history lotteries have been used to raise money for public works projects, schools and wars. They are a form of gambling in which entrants pay a small amount to be included in a draw for a prize. Lottery participants are generally aware of the risk that they may lose all or part of their investment, and the prizes are awarded on the basis of chance.

Financial lotteries are the most common, in which participants purchase tickets for a specific sum of money. The prize money can range from a few dollars to millions of dollars. In some cases the winnings are not immediately withdrawn but invested for future returns. This type of lottery has been criticized as an addictive form of gambling.

Other types of lotteries offer non-monetary prizes like entertainment value or vacation trips. Purchasing a ticket in these situations may represent a rational choice for some individuals, depending on the combined expected utility of the monetary and non-monetary benefits.

In the United States, state governments operate lotteries, and are therefore considered monopolies that do not allow commercial lotteries to compete with them. The profits from these lotteries are allocated to various government programs, as shown in Table 7.2. The state of New York has allocated more than $30 billion in lottery profits since 1967 to fund education, for example. Almost 186,000 retailers sell lottery products in the United States. Many of these are convenience stores, although other outlets include nonprofit organizations (churches and fraternal groups), service stations, restaurants and bars, and bowling alleys.