The lottery is a huge business. In 2011, $57.6 billion worth of lottery tickets were sold in 43 states and the District of Columbia. There are three major parties (governments, lottery players, and retailers) involved in the lottery industry, plus many more stakeholders. This paper examines the lottery from the viewpoints of these three primary parties. From the lottery players' viewpoint, we show how to statistically determine the expected value of a lottery ticket and discuss when to conclude it is profitable to buy lottery tickets. We explore the question of whether lottery players are rational. State governments have, for years, relied on lottery money to fund education and other expenses. We examine the economic benefits as well as the societal costs of operating the lottery business. Finally, we examine the economics of selling lottery tickets from the retailers' viewpoint.



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