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

Author

Listed:
  • Catriona Purfield
  • Patrick Waldron

Abstract

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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    Cited by:

    1. Gaudry, Marc & de Lapparent, Matthieu, 2013. "Part 3. Multivariate road safety models: Future research orientations and current use to forecast performance," Research in Transportation Economics, Elsevier, vol. 37(1), pages 38-56.

    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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