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State lottery in the lab: an experiment in external validity

Author

Listed:
  • Raman Kachurka

    (University of Warsaw)

  • Michał Krawczyk

    (University of Warsaw)

  • Joanna Rachubik

    (University of Warsaw)

Abstract

In this study, we conduct a laboratory experiment in which the subjects make choices between real-world lottery tickets typically purchased by lottery customers. In this way, we can reliably offer extremely high potential payoffs, something rarely possible in economic experiments. In a between-subject design, we separately manipulate several features that distinguish the situation faced by the customers in the field and by subjects in typical laboratory experiments. We also have the unique opportunity to compare our data to actual sales data provided by the operator of the lottery. We find the distributions to be highly similar (meaning high external validity for this particular setting). The only manipulation that makes a major difference is that when the probabilities of winning specific amounts are explicitly provided (which is not the case in the field), choices shift towards options with lower maximum possible payoff and lower payoff variance. We also find that subjects generally show preference for long shots and that standard laboratory measures of risk posture fail to explain their behavior in the main task.

Suggested Citation

  • Raman Kachurka & Michał Krawczyk & Joanna Rachubik, 2021. "State lottery in the lab: an experiment in external validity," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1242-1266, December.
    • Handle: RePEc:kap:expeco:v:24:y:2021:i:4:d:10.1007_s10683-020-09696-2
    DOI: 10.1007/s10683-020-09696-2
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    More about this item

    Keywords

    External Validity; Long shot bias; State lotteries;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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