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I picture this story taking place somewhere in the United States. Somewhere very pleasant -- a little town somewhere in a nice, green area of the country with a good summer climate (it's nice and warm, but not that hot at the start of the story, the flowers are all in bloom). Maybe upstate New York, or Pennsylvania or somewhere like that.
I think that the author purposely makes the setting seem very pleasant. This is so we can be even more shocked by the horrible thing the people are doing. I think Jackson wants us to see how even normal people in pleasant settings are capable of great evil.
In Jackson's "The Lottery," the structure leading to the surprise ending is dependent on the detached, matter-of-fact point of view, together with the familiar and ordinary setting. The point is that the setting is ordinary. These are normal people.
The story is a scapegoat story. And all societies scapegoat. The point of the story would be lost if the setting wasn't familiar and ordinary. The guilt would then lie with the particular setting and those particular people.
But back to the surprise ending. If there were anything about the setting that was out of the ordinary or odd or eccentric, the surprise ending wouldn't come as such a surprise. The structure of the story is as it has to be.
Finally, the reader is not told anything about where the story takes place. Again, that is the point. It could be anywhere, anytime.
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