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Lottery pricing under time pressure

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Author Info
Pavlo R. Blavatskyy
Wolfgang R. Köhler
Abstract

This 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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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp422.

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Date of creation: Jul 2009
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Handle: RePEc:zur:iewwpx:422

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Related research
Keywords: 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:

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  1. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
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This page was last updated on 2009-12-3.

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