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Raising Revenue With Raffles: Evidence from a Laboratory Experiment

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Author Info
Alexander Matros
Wooyoung Lim
Theodore Turocy

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Abstract

Lottery and raffle mechanisms have a long history as economic institutions for raising funds. In a series of laboratory experiments we find that total spending in raffles is much higher than Nash equilibrium predicts. Moreover, this overspending is persistent as the number of participants in the raffle increases. Subjects as a group do not strategically reduce spending as group sizes increase, in contrast to the comparative statics theory provides. The lack of strategic response cannot be explained by learning direction theory or level-$k$ reasoning models, although quantal response equilibrium can fit the observed distribution of choices. Much of the observed spending levels in the larger groups cannot be explained by financial incentives.

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Paper provided by University of Pittsburgh, Department of Economics in its series Working Papers with number 377.

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Date of creation: Feb 2009
Date of revision: Feb 2009
Handle: RePEc:pit:wpaper:377

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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This page was last updated on 2009-11-22.

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