Lottery pricing under time pressure
AbstractThis paper investigates how subjects determine minimum selling prices for lotteries. We design an experiment where subjects have at every moment an incentive to state their minimum selling price and to adjust the price if they believe that the price that they stated initially was not optimal. We observe frequent and sizeable price adjustments. We find that random pricing models can not explain the observed price patterns. We show that earlier prices contain information about future price adjustments. We propose a model of Stochastic Pricing that offers an intuitive explanation for these price adjustment patterns.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 422.
Date of creation: Jul 2009
Date of revision:
Time pressure; certainty equivalent; experiment; stochastic; Becker-DeGroot- Marschak (BDM) method;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-11 (All new papers)
- NEP-CBE-2009-07-11 (Cognitive & Behavioural Economics)
- NEP-UPT-2009-07-11 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Pavlo Blavatskyy & Wolfgang Köhler, 2009. "Range effects and lottery pricing," Experimental Economics, Springer, vol. 12(3), pages 332-349, September.
- Ulrich Schmidt & Stefan Trautmann, 2014. "Common consequence effects in pricing and choice," Theory and Decision, Springer, vol. 76(1), pages 1-7, January.
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