Why lotteries can make winning feel more valuable than buying

Buying a ticket is one thing. Put that same ticket behind the three simple words, “Enter to win,” and suddenly it feels worth chasing, as if winning feels more valuable than buying. It may seem like the lottery is what creates the excitement, but economist Judd Kessler says it’s often a sign the excitement was already there.

“The reason they’re having a lottery in the first place is because there is what economists would call excess demand,” he told Fortune. “More people want the thing at that price than can be served.” In other words, lotteries often reveal demand rather than create it.

Businesses don’t always eliminate scarcity Kessler, a professor at the University of Pennsylvania’s Wharton School and author of Lucky by Design, calls lotteries, restaurant lines, waiting lists and Ticketmaster queues “hidden markets,” ways of allocating scarce goods without simply raising prices until demand falls. A line around the block at a restaurant can send a powerful signal to consumers. “Lots of people want this thing at this price.

That means maybe I should too,” Kessler said. Businesses facing excess demand have options. They can raise prices until fewer people are willing to pay.

They can sell on a first-come, first-served basis. Or they can preserve those hidden markets. Some sellers intentionally perpetuate them instead of simply raising prices because scarcity itself can generate excitement and strengthen future demand, Kessler said.

The appeal of winning goes beyond saving money. He said that feeling is part of what hidden markets create. “The winners get the feeling they got something that other people wanted, that they couldn’t get,” he told Fortune.

Broadway lottery entrant Ella Hozhei has experienced that excitement firsthand. Since she lives in New York and can be flexible on dates, she regularly enters drawings as a cheaper way to see shows she wants to watch. By not paying full price, she said the lottery let her take chances on shows she wasn’t sure she’d en