Optimal Operation of Public Lotteries

Abstract

Public lotteries form an important source of revenue for many national and state governments, but little quantitative effort has been applied to their efficient operation. We here formulate a model in which the net revenue per unit time from the operation of a lottery depends upon the prizes offered, the price charged per ticket, and the time interval between successive drawings. The model is solved for the optimal values of these decision variables, and some illustrative numerical results are presented.