Preference for Skew in Lotteries: Evidence from the Laboratory
AbstractUsing a laboratory experiment we investigate how skew in uences 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 University Library of Munich, Germany in its series MPRA Paper with number 17165.
Date of creation: 09 Jun 2009
Date of revision:
Risk; Skew; Gambling; Lab Experiment;
Other versions of this item:
- Thomas Astebro & José Mata & Luis Santos-Pinto, 2009. "Preference for Skew in Lotteries: Evidence from the Laboratory," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 09.09, Université de Lausanne, Faculté des HEC, DEEP.
- 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-2009-09-19 (All new papers)
- NEP-CBE-2009-09-19 (Cognitive & Behavioural Economics)
- NEP-EXP-2009-09-19 (Experimental Economics)
- NEP-UPT-2009-09-19 (Utility Models & Prospect Theory)
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