Pari-mutuel, in full
The defining feature is that the prize per winner is not known before the draw. The operator commits to percentages, not amounts. Once sales close, the pool is fixed, the operator's share is removed, and what remains is split tier by tier. A tier with one winner pays that person the whole allocation. The same tier with forty winners pays each of them a fortieth of it.
That is the opposite of a fixed-prize game, where the operator states an amount in advance and pays it to every qualifying ticket however many there are. Under pari-mutuel the operator carries no payout risk, because it can only ever distribute a percentage of what it took in. Under fixed prizes the risk is real: an unusually popular number combination can produce more winners than the sales support.
The system came out of horse racing rather than lotteries. Joseph Oller, a French-Catalan entrepreneur, introduced it in 1867 as an alternative to bookmakers setting their own odds, and the name is French for mutual stake. Racecourse tote boards and lottery prize tables have run on the same arithmetic ever since.
One consequence is worth planning around. Because the split is by head count, picking a combination that many other people also picked lowers the payout if it comes up. Dates cluster on 1 to 31, and sequences like 1-2-3-4-5-6 are chosen by thousands of players. The odds of those lines winning are identical to any other line, but the amount collected if they do win is not.
- Lottery mechanics
- Parimutuel, Pool betting, Tote betting
A worked example
Say a draw takes £10,000,000 in stakes and the rules allocate 10% of the prize fund to the match-four tier. If the prize fund is 50% of sales, that is £5,000,000, so the match-four allocation is £500,000. With 5,000 tickets matching four numbers, each collects £100. Had only 2,000 tickets matched four, each would have collected £250 from the same £500,000.
Sources
The pari-mutuel system was devised in 1867 by Joseph Oller, a French-Catalan entrepreneur, for betting on horse racing.
Wikipedia — Parimutuel bettingPowerball states set cash amounts for its eight lower tiers but not for the top tier, which is the shape of a game whose jackpot is pooled and whose lower prizes are fixed.
Powerball — Prizes and odds chart
See also
Where it comes up on this site
Pari-mutuel: frequently asked
Estimates published before a draw assume a normal number of winners. In a pari-mutuel tier the allocation is fixed but the head count is not, so a combination more people played than usual divides the same money more ways. The figure only firms up once sales close and the winning tickets have been counted.
Joseph Oller, a French-Catalan entrepreneur, in 1867, for horse racing rather than for lotteries.
No. Many games pay fixed amounts on the lower tiers and pool only the jackpot, and some daily digit games are fixed the whole way through. The operator's own prize table states which tiers are shares of a pool.