Article1991

On the Optimal Design of Lotteries

123 citations0/0 files storedEconomica

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Decision-Making and Behavioral Economics Financial Literacy, Pension, Retirement Analysis Economic and Environmental Valuation

Abstract

In recent years the Expected Utility model of choice under risk has been generalized to cope with phenomena such as probability weighting. In the present paper, one such generalized approach, the Rank-Dependent Expected Utility model, is applied to the problem of lottery gambling. The model is used to derive an optimal prize structure for lotteries, involving a few large prizes and a large number of small prizes. Other forms of gambling, such as racetrack betting, are discussed in the light of this result. On The Optimal Design Of Lotteries

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References

1988Prospect theory: An analysis of decision under risk 2019Theory of games and economic behavior 1961Risk, Ambiguity, and the Savage Axioms 1959Portfolio Selection: Efficient Diversification of Investments 1982A theory of anticipated utility 1948The Utility Analysis of Choices Involving Risk 1987The Dual Theory of Choice under Risk 1969Rules for Ordering Uncertain Prospects

Cited by

1994Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax 2002The revenue impacts of cross-border lottery shopping in the presence of spatial autocorrelation 2000Elasticity of Demand for UK National Lottery Tickets 2002Can Expected Utility Theory Explain Gambling?1992THEORIES OF CHOICE UNDER IGNORANCE AND UNCERTAINTY 1993Self-Insurance and Self-Protection: A Nonexpected Utility Analysis 1995TESTING FOR EFFICIENCY IN LOTTO MARKETS 2015Loving the long shot: Risk taking with skewed lotteries

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