The Queue Is the Signal
A Broadway ticket, a SpaceX IPO share, a national-park permit: each sits behind a lottery, and most consumers never ask why. Judd Kessler, a professor at the University of Pennsylvania's Wharton School and author of Lucky by Design, has a clean answer.
'The reason they're having a lottery in the first place is because there is what economists would call excess demand,' Kessler told Fortune. 'More people want the thing at that price than can be served.'
In his framework, lotteries, restaurant lines, waiting lists and Ticketmaster queues are what he calls 'hidden markets' — mechanisms for allocating scarce goods without raising prices until demand falls.
Three Levers, One Scarce Good
When a seller faces more buyers than supply, Kessler identifies three options: raise prices until demand drops, run a first-come, first-served queue, or preserve the hidden market through a lottery or wait list.
Some sellers deliberately choose the third path. Scarcity, Kessler argues, can generate excitement and strengthen future demand. The winner receives more than the good itself. '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 described exactly that dynamic. She regularly enters drawings as a cheaper way to see shows in New York, but when she won tickets to the Stranger Things stage production, the mechanism changed the experience. 'It made me feel like I had been chosen to see the show,' Hozhei told Fortune.
Government Lotteries: Equity Over Price Discovery
Where private sellers use lotteries to manage brand heat, governments use them for a different purpose. Kessler identifies what he calls the 'three E's' guiding public lotteries: equity, efficiency and ease.
The federal government uses a lottery to allocate Diversity Visas each year to applicants from countries with historically low immigration rates. National parks use them to manage access to high-demand destinations such as The Wave in Arizona. New York City uses them to allocate affordable housing.
This past week, New York City announced it will distribute 500 free tickets to the 2026 USA Track & Field Outdoor & Para National Championships through a lottery alongside discounted tickets. Mayor Zohran Mamdani said the giveaway is intended to make the championships more affordable and accessible.
Fidelity also entered this territory last month, saying it would use a lottery to allocate shares of the anticipated SpaceX IPO among retail investors if demand exceeded its allotment.
'Lotteries, if designed properly, are a very good way of doing those allocations,' Kessler said.
The Market Has Already Voted
The numbers come first, and here the number is simple: wherever a lottery appears, a price signal was suppressed. That is a legitimate strategic choice for a private brand protecting its mystique — scarcity is a real asset on a balance sheet. But when government agencies substitute lottery allocation for price discovery, the 'three E's' come at a cost: the information that prices generate disappears, and with it the incentive to expand supply.
Kessler's framework is genuinely useful precisely because it names the trade-off honestly. Hidden markets are not irrational — they serve real functions. But free-enterprise readers should note the asymmetry: a private seller who runs a lottery bears the opportunity cost of foregone revenue. A government agency bears no such discipline. Capital rewards clear rules; lotteries, by design, replace them with chance.
