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Raising Revenue With Raffles: Evidence from a Laboratory Experiment

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  • Alexander Matros
  • Wooyoung Lim
  • Theodore Turocy

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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Bibliographic Info

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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Cited by:
  1. Philippe Jehiel & Laurent Lamy, 2011. "Absolute auctions and secret reserve prices: Why are they used?," Levine's Working Paper Archive 786969000000000316, David K. Levine.
  2. Sebastian J. Goerg & John Lightle & Dmitry Ryvkin, 2013. "Priming the charitable pump: An experimental investigation of two-stage raffles," Working Papers, Department of Economics, Florida State University wp2013_05_01, Department of Economics, Florida State University.

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