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Measuring the Output and Prices of the Lottery Sector: An Application of Implicit Expected Utility Theory

In: Price Index Concepts and Measurement

  • Kam Yu
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Using implicit expected utility theory, a money metric of utility derived from playing a lottery game is developed. Output of the lottery sector can be defined as the difference in utility with and without the game. Using a kinked parametric functional form, outputs of the Canadian Lotto 6/49 are estimated. Results show that this direct economic approach yield an average output which is almost three times of the official GDP, which takes total factor costs as output. A by-product of the estimation is an implicit price index for lottery, which can serve as a cost-of-living index for the CPI. The estimated price elasticity of demand -0.67 closely resembles results for the U.K. and Israel in previous studies.

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This chapter was published in:
  • W. Erwin Diewert & John S. Greenlees & Charles R. Hulten, 2009. "Price Index Concepts and Measurement," NBER Books, National Bureau of Economic Research, Inc, number diew08-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 5086.
    Handle: RePEc:nbr:nberch:5086
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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