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Parimutuel Lotteries: Gamblers' Behavior and the Demand for Tickets

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  • Ursula Hauser-Rethaller
  • Ulrich König
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    Abstract

    In a parimutuel lottery, players face a strategic situation. We investigate how rational lottery players should choose combinations of numbers. Using data from the Austrian Lotto we compare this to actual behavior. We propose a relationship between the number of tickets and the expected loss of taking part, based on both theoretical and empirical findings about players' behavior. Rollovers introduce exogenous price variation allowing to estimate properties of a demand function sensitive to the expected loss. Contrary to previous work our model accounts for conscious selection. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2002.

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    Bibliographic Info

    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 3 (2002)
    Issue (Month): 2 (05)
    Pages: 223-245

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    Handle: RePEc:bla:germec:v:3:y:2002:i:2:p:223-245

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    References

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    1. Farrell, Lisa & Morgenroth, Edgar & Walker, Ian, 1999. " A Time Series Analysis of U.K. Lottery Sales: Long and Short Run Price Elasticities," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 513-26, November.
    2. Papachristou, George & Karamanis, Dimitri, 1998. "Investigating efficiency in betting markets: Evidence from the Greek 6/49 Lotto," Journal of Banking & Finance, Elsevier, vol. 22(12), pages 1597-1615, December.
    3. Ian Walker, 1998. "The economic analysis of lotteries," Economic Policy, CEPR & CES & MSH, vol. 13(27), pages 357-402, October.
    4. Philip J. Cook & Charles T. Clotfelter, 1991. "The Peculiar Scale Economies of Lotto," NBER Working Papers 3766, National Bureau of Economic Research, Inc.
    5. Hauser, Ursula & Koenig, Ulrich & Krylova, Elizaveta, 2000. "Gamblers' Rationality in Parimutuel Soccer Betting," Economics Series 87, Institute for Advanced Studies.
    6. Gabriel, Paul E & Marsden, James R, 1990. "An Examination of Market Efficiency in British Racetrack Betting," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 874-85, August.
    7. Farrell, Lisa & Walker, Ian, 1999. "The welfare effects of lotto: evidence from the UK," Journal of Public Economics, Elsevier, vol. 72(1), pages 99-120, April.
    8. Scoggins, John F., 1995. "The Lotto and Expected Net Revenue," National Tax Journal, National Tax Association, vol. 48(1), pages 61-70, March Cit.
    9. Farrell, Lisa, et al, 2000. "The Demand for Lotto: The Role of Conscious Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(2), pages 228-41, April.
    10. Conlisk, John, 1993. " The Utility of Gambling," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 255-75, June.
    11. Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-74, Spring.
    12. Simon, Jonathan, 1998. "An Analysis of the Distribution of Combinations Chosen by UK National Lottery Players," Journal of Risk and Uncertainty, Springer, vol. 17(3), pages 243-76, December.
    13. Suits, Daniel B, 1979. "The Elasticity of Demand for Gambling," The Quarterly Journal of Economics, MIT Press, vol. 93(1), pages 155-62, February.
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    Cited by:
    1. Andrey Kudryavtsev & Gil Cohen & Shlomit Hon-Snir, 2013. "“Rational” or “Intuitive”: Are Behavioral Biases Correlated Across Stock Market Investors?," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(2), June.

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