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Lottery pricing under time pressure

  • Pavlo R. Blavatskyy
  • Wolfgang R. Köhler
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    This paper investigates how subjects determine minimum selling prices for lotteries. We design an experiment where subjects have at every moment an incentive to state their minimum selling price and to adjust the price if they believe that the price that they stated initially was not optimal. We observe frequent and sizeable price adjustments. We find that random pricing models can not explain the observed price patterns. We show that earlier prices contain information about future price adjustments. We propose a model of Stochastic Pricing that offers an intuitive explanation for these price adjustment patterns.

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    Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 422.

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    Date of creation: Jul 2009
    Date of revision:
    Handle: RePEc:zur:iewwpx:422
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    1. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
    2. Pavlo Blavatskyy & Wolfgang Köhler, 2009. "Range effects and lottery pricing," Experimental Economics, Springer, vol. 12(3), pages 332-349, September.
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