Preference for Skew in Lotteries: Evidence from the Laboratory
AbstractUsing a laboratory experiment we investigate how skew inuences choices under risk. We find that subjects make significantly riskier choices when the distribution of payoffs is positively skewed, these choices being driven in part by the shape of the utility function but also by subjective distortion of probabilities. A utility model with probability distortion calibrated on laboratory data is able to explain why most gamblers in public lotteries buy only a small number of tickets.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 09.09.
Length: 25 pp. + tables and figures
Date of creation: Jun 2009
Date of revision:
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More information through EDIRC
risk; skew; gambling; lab experiment;
Other versions of this item:
- Santos-Pinto, Luís & Astebro, Thomas & Mata, José, 2009. "Preference for Skew in Lotteries: Evidence from the Laboratory," MPRA Paper 17165, University Library of Munich, Germany.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-26 (All new papers)
- NEP-CBE-2009-09-26 (Cognitive & Behavioural Economics)
- NEP-EXP-2009-09-26 (Experimental Economics)
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