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On lottery sales, jackpot sizes and irrationality: A cautionary note

  • Peel, D.A.

Jackpot size has a greater impact than expected price as a determinant of lottery sales suggesting that agents exhibit irrational lotto mania. We demonstrate why this conclusion is problematical by considering the reduced form obtained if agents are described by Cumulative Prospect Theory.

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File URL: http://www.sciencedirect.com/science/article/B6V84-50X2N9T-8/2/fd197eb7e5fa4827010736293357a950
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 109 (2010)
Issue (Month): 3 (December)
Pages: 161-163

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Handle: RePEc:eee:ecolet:v:109:y:2010:i:3:p:161-163
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  2. Enrico Giorgi & Thorsten Hens, 2006. "Making prospect theory fit for finance," Financial Markets and Portfolio Management, Springer, vol. 20(3), pages 339-360, September.
  3. David Forrest & Robert Simmons & Neil Chesters, 2002. "Buying a Dream: Alternative Models of Demand for Lotto," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 485-496, July.
  4. Benartzi, Shlomo & Thaler, Richard H, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 73-92, February.
  5. Quiggin, John, 1991. "On the Optimal Design of Lotteries," Economica, London School of Economics and Political Science, vol. 58(229), pages 1-16, February.
  6. Philip J. Cook & Charles T. Clotfelter, 1991. "The Peculiar Scale Economies of Lotto," NBER Working Papers 3766, National Bureau of Economic Research, Inc.
  7. Beenstock, Michael & Haitovsky, Yoel, 2001. "Lottomania and other anomalies in the market for lotto," Journal of Economic Psychology, Elsevier, vol. 22(6), pages 721-744, December.
  8. Walker, Ian & Young, Juliet, 2001. "An Economist's Guide to Lottery Design," Economic Journal, Royal Economic Society, vol. 111(475), pages F700-722, November.
  9. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
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