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Extending the Mean-Variance Framework to Test the Attractiveness of Skewness in Lotto Play


  • Catriona Purfield
  • Patrick Waldron


Economic theory proposes that consumers are primarily concerned with increasing the mean and reducing the variance of the payoff when choosing between products the return to which is uncertain. This approach fails to explain the popularity of Lotto and other forms of gambling. The highly skewed prize distribution of the Lotto game suggests a case for extending the theory of choice in mean-variance space to include a third dimension, skewness. Empirical examination of Lotto sales supports the case for the inclusion of skewness and other, non-monetary, variables in a demand function.

Suggested Citation

  • Catriona Purfield & Patrick Waldron, 1997. "Extending the Mean-Variance Framework to Test the Attractiveness of Skewness in Lotto Play," Economics Technical Papers 974, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduet:974

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    References listed on IDEAS

    1. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    2. Paul Gregg & Jonathan Wadsworth, 1996. "Mind the Gap," CEP Discussion Papers dp0303, Centre for Economic Performance, LSE.
    3. Jan Rutkowski, 1996. "High skills pay off: the changing wage structure during economic transition in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 89-112, May.
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    More about this item

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty


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