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In literature, irony is basic term for the difference between the way things seem and the way they actually are, or what the readers or audience expect and what they get. Situational irony is a more specific sub-category of irony; it occurs when the reader, audience, or characters expect one thing, but get another.
The general premise of "The Lottery," a short story written by Shirley Jackson, involves situational irony. In the story, the citizens of a rural farming village meet in the square in order for the town's annual lottery to be held. The name of each citizen is entered in the drawing, and a generally festive attitude seems prevalent until near the end of the story.
For the most part, readers assume that the "winner" of the lottery will earn some pleasant reward, or be given something good. However, the person whose name is drawn in this story (Tess Hutchinson) is stoned by the townspeople because they believe that doing so will ensure a good crop. Basically, their unwillingness to part with tradition results in an annual murder. This surprise is an example of irony of situation, or situational irony.
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