Essentially, a lottery is an organized system for distributing money or other prizes in a random manner. It has several elements, including the collection and pooling of money staked by bettors, a drawing for determining winners, and rules that determine the frequency and size of prizes.
First and foremost, it must have a mechanism for recording the identities of bettors, their amounts staked, and the numbers or other symbols on which they bet these amounts. This may be done with a printed ticket or by a computer, which records the identity of all bettors and their stakes on a large scale.
Second, it must have a method of identifying the winning number or symbols and determining their origin. This may be done by a randomizer, a device that causes the tickets to be mixed by some mechanical means and then randomly selected. This has become increasingly common in modern lotteries, which use computers for the task of generating numbers and ensuring that chance and only chance is involved in the selection of winners.
Third, it must have a system for collecting the funds that are paid to purchase tickets and distributing them among the various sales agents who then buy tickets in bulk for marketing in the streets. This system has a hierarchy of agents, with each agent passing the money received from his customers up to the next higher level in the organization until it is banked and made available for the lottery drawing.
Fourth, it must have a system for determining whether there is a nonmonetary value (entertainment) in playing that can be outweighed by the disutility of the monetary loss that would result from the purchase. If this is the case, then the decision to buy a lottery ticket could be considered rational.
Fifth, it must have a method for establishing the odds of winning. This can take the form of a mathematical formula, such as a factorial. It can also be accomplished by getting enough people together to raise money through investors.
Sixth, it must have a means for selecting the numbers to be drawn. This can be done by using a computer or a mechanical device, such as a tally board or dice.
Seventh, it must have a procedure for determining the numbers to be drawn in a draw. This can be done by a computer or a mechanical device, either of which is usually used in larger-scale lotteries.
Eighth, it must have a method for deciding which numbers to choose in a drawing. This can be done by a computer, a mechanical device, or an automated system that selects the numbers to be drawn.
Nineth, it must have a system for ensuring that the winning tickets are awarded to legitimate bettors. This can be done by verifying the identities of the persons whose tickets are drawn, or by checking to see if there is any discrepancy between the winning ticket and the numbers on which it was drawn.