Extending the Mean-Variance Framework to Test the Attractiveness of Skewness in Lotto Play
AbstractEconomic theory proposes that consumers are primarily concerned with increasing the mean and reducing the variance of the payoff when choosing between products the return to which is uncertain. This approach fails to explain the popularity of Lotto and other forms of gambling. The highly skewed prize distribution of the Lotto game suggests a case for extending the theory of choice in mean-variance space to include a third dimension, skewness. Empirical examination of Lotto sales supports the case for the inclusion of skewness and other, non-monetary, variables in a demand function.
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Bibliographic InfoPaper provided by Trinity College Dublin, Department of Economics in its series Economics Technical Papers with number 974.
Date of creation: 1997
Date of revision:
Find related papers by JEL classification:
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