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Reference dependence and lottery participation

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  • Robertas Zubrickas

Abstract

We assume that lottery participants are poor relative to their target income. Reference dependence with loss aversion can render the marginal utility of income non‐monotonic in line with the Friedman–Savage hypothesis. As a result, lottery participation can be rationalized without invoking probability weighting. The theoretical implications align with recent empirical evidence on lottery spending.

Suggested Citation

  • Robertas Zubrickas, 2026. "Reference dependence and lottery participation," Economic Inquiry, Western Economic Association International, vol. 64(3), pages 886-894, July.
    • Handle: RePEc:bla:ecinqu:v:64:y:2026:i:3:p:886-894
    DOI: 10.1111/ecin.70054
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