The Medium Prizes Paradox: Evidence from a Simulated Casino
AbstractMainstream explanations to gambling specify conditions under which human agents are locally risk loving. Such theories, however, fail to explain the typically observed prize distribution of a few large prizes and a large number of medium ones--hence the medium prizes paradox. In the current study we show that adaptive learning models recently proposed in the literature offer a solution. Simulations of such models predict that multiple medium prizes will slow down the decrease (over time) in agents' inclination to gamble. We run a laboratory experiment that supports this explanation and shows that the positive effect of medium prizes on the inclination to gamble increases with time. Copyright 2001 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Journal of Risk and Uncertainty.
Volume (Year): 22 (2001)
Issue (Month): 3 (May)
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Web page: http://www.springerlink.com/link.asp?id=100299
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- Peel, D.A., 2013. "Heterogeneous agents and the implications of the Markowitz model of utility for multi-prize lottery tickets," Economics Letters, Elsevier, vol. 119(3), pages 264-267.
- Per Binde, 2005. "Gambling Across Cultures: Mapping Worldwide Occurrence and Learning from Ethnographic Comparison," International Gambling Studies, Taylor & Francis Journals, vol. 5(1), pages 1-27, June.
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