Do Consumers Gamble to Convexify?
AbstractThe combination of credit constraints and indivisible consumption goods may induce some risk-averse individuals to gamble to have a chance of crossing a purchasing threshold. One implication of this is that income effects for individuals who choose to gamble are likely to be larger than for the general population. Using UK data on gambling wins, other windfalls and durable goods purchases, we show that winners display higher income effects than non-winners but only amongst those likely to be credit-onstrained. This is consistent with credit-constrained, risk-averse agents gambling to convexify their budget set.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1314.
Length: 46 pages
Date of creation: Jun 2013
Date of revision:
Gambling; Lotteries; Consumption; Durables.;
Other versions of this item:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Keeler, James P & James, William L & Abdel-Ghany, Mohamed, 1985. "The Relative Size of Windfall Income and the Permanent Income Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 209-15, June.
- Joulfaian, D. & Wilheim, M.O., 1992.
"Inheritance and Labor Supply,"
6-92-2, Pennsylvania State - Department of Economics.
- Robert M. Townsend & Kenichi Ueda, 2006.
"Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation -super-1,"
Review of Economic Studies,
Oxford University Press, vol. 73(1), pages 251-293.
- Robert M. Townsend & Kenichi Ueda, 2003. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation," IMF Working Papers 03/193, International Monetary Fund.
- Raj Chetty & Adam Szeidl, 2007.
"Consumption Commitments and Risk Preferences,"
The Quarterly Journal of Economics,
MIT Press, vol. 122(2), pages 831-877, 05.
- Lisa Farrell & Roger Hartley, .
"Can Expected Utility Theory Explain Gambling?,"
Discussion Papers in Public Sector Economics
00/8, Department of Economics, University of Leicester.
- Roger Hartley & Lisa Farrell, 1998. "Can Expected Utility Theory Explain Gambling?," Keele Department of Economics Discussion Papers (1995-2001) 98/02, Department of Economics, Keele University.
- Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993.
"The Economics of Rotating Savings and Credit Associations,"
American Economic Review,
American Economic Association, vol. 83(4), pages 792-810, September.
- Timothy Besley & Stephen Coate & Glenn Loury, 1992. "The Economics of Rotating Savings and Credit Associations," Boston University - Institute for Economic Development 24, Boston University, Institute for Economic Development.
- Besley, T. & Coate, S. & Loury, G., 1992. "The economics of Rotating Savings and Credit Associations," Papers 157, Princeton, Woodrow Wilson School - Development Studies.
- Besley, T. & Coate, S. & Loury, G., 1990. "The Economics Of Rotating Savings And Credit Associations," Working papers 556, Massachusetts Institute of Technology (MIT), Department of Economics.
- Besley, T. & Coate, S. & Loury, G., 1990. "The Economics Of Rotating Savings And Credit Associations," Papers 149, Princeton, Woodrow Wilson School - Development Studies.
- Bailey, Martin J & Olson, Mancur & Wonnacott, Paul, 1980. "The Marginal Utility of Income Does not Increase: Borrowing, Lending, and Friedman-Savage Gambles," American Economic Review, American Economic Association, vol. 70(3), pages 372-79, June.
- Richard Rogerson, 2010.
"Indivisible Labor, Lotteries and Equilibrium,"
Levine's Working Paper Archive
250, David K. Levine.
- Hansen, Gary D., 1985.
"Indivisible labor and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 16(3), pages 309-327, November.
- Katherine L. Milkman & John L. Beshears, 2007.
"Mental Accounting and Small Windfalls: Evidence from an Online Grocer,"
Harvard Business School Working Papers
08-024, Harvard Business School, revised Sep 2008.
- Milkman, Katherine L. & Beshears, John, 2009. "Mental accounting and small windfalls: Evidence from an online grocer," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 384-394, August.
- Ng Yew Kwang, 1965. "Why do People Buy Lottery Tickets? Choices Involving Risk and the Indivisibility of Expenditure," Journal of Political Economy, University of Chicago Press, vol. 73, pages 530.
- Atalay, Kadir & Bakhtiar, Fayzan & Cheung, Stephen L. & Slonim, Robert, 2012.
"Savings and Prize-Linked Savings Accounts,"
IZA Discussion Papers
6927, Institute for the Study of Labor (IZA).
- Kedir, Abbi M. & Disney, Richard & Dasgupta, Indraneel, 2011.
"Why Use ROSCAs When You Can Use Banks? Theory and Evidence from Ethiopia,"
IZA Discussion Papers
5767, Institute for the Study of Labor (IZA).
- Abbi M Kedir & Richard Disney & Indraneel Dasgupta, 2011. "Why use ROSCAs when you can use banks? Theory, and evidence from Ethiopia," Discussion Papers in Economics 11/32, Department of Economics, University of Leicester, revised Jun 2011.
- Abbi Kedir & Richard Disney & Indraneel Dasgupta, . "Why Use Roscas When You Can Use Banks? Theory And Evidence From Ethiopia," Discussion Papers 11/05, University of Nottingham, CREDIT.
- Appelbaum, Elie & Katz, Eliakim, 1981. "Market Constraints as a Rationale for the Friedman-Savage Utility Function," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 819-25, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sumru Oz).
If references are entirely missing, you can add them using this form.