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On lottery sales, jackpot sizes and irrationality: A cautionary note

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Author Info

  • Peel, D.A.

Abstract

Jackpot size has a greater impact than expected price as a determinant of lottery sales suggesting that agents exhibit irrational lotto mania. We demonstrate why this conclusion is problematical by considering the reduced form obtained if agents are described by Cumulative Prospect Theory.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 109 (2010)
Issue (Month): 3 (December)
Pages: 161-163

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Handle: RePEc:eee:ecolet:v:109:y:2010:i:3:p:161-163

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Lottery sales Cumulative prospect theory Jackpot size Irrationality;

References

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  1. Beenstock, Michael & Haitovsky, Yoel, 2001. "Lottomania and other anomalies in the market for lotto," Journal of Economic Psychology, Elsevier, vol. 22(6), pages 721-744, December.
  2. Enrico Giorgi & Thorsten Hens, 2006. "Making prospect theory fit for finance," Financial Markets and Portfolio Management, Springer, vol. 20(3), pages 339-360, September.
  3. Walker, Ian & Young, Juliet, 2001. "An Economist's Guide to Lottery Design," Economic Journal, Royal Economic Society, vol. 111(475), pages F700-722, November.
  4. Benartzi, Shlomo & Thaler, Richard H, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 73-92, February.
  5. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  6. Philip J. Cook & Charles T. Clotfelter, 1991. "The Peculiar Scale Economies of Lotto," NBER Working Papers 3766, National Bureau of Economic Research, Inc.
  7. David Forrest & Robert Simmons & Neil Chesters, 2002. "Buying a Dream: Alternative Models of Demand for Lotto," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 485-496, July.
  8. Quiggin, John, 1991. "On the Optimal Design of Lotteries," Economica, London School of Economics and Political Science, vol. 58(229), pages 1-16, February.
  9. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
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Cited by:
  1. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.

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