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On a Lottery Pricing Anomaly: Time Tells the Tale

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  • Wilcox, Nathaniel T

Abstract

This article identifies a lottery pricing anomaly, which I call the "r=x" anomaly," that is present in past pricing experiments--namely, a tendency for subjects to announce that their minimum selling price for some binary lottery is the greater of the two lottery prizes. The study shows that the anomaly is inconsistent with two theoretical explanations for another well-known pricing anomaly (preference reversal) and experimentally replicates those inconsistencies. The new experiment also measures the time subjects spend making their pricing decisions. These decision-time measurements suggest that the r=x anomaly may be a decision-cost effect. Copyright 1993 by Kluwer Academic Publishers

Suggested Citation

  • Wilcox, Nathaniel T, 1993. "On a Lottery Pricing Anomaly: Time Tells the Tale," Journal of Risk and Uncertainty, Springer, vol. 7(3), pages 311-324, December.
    • Handle: RePEc:kap:jrisku:v:7:y:1993:i:3:p:311-24
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    Cited by:

    1. Ubeda, Paloma, 2014. "The consistency of fairness rules: An experimental study," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 88-100.
    2. Pavlo Blavatskyy & Wolfgang Köhler, 2011. "Lottery pricing under time pressure," Theory and Decision, Springer, vol. 70(4), pages 431-445, April.
    3. Clithero, John A., 2018. "Response times in economics: Looking through the lens of sequential sampling models," Journal of Economic Psychology, Elsevier, vol. 69(C), pages 61-86.
    4. Peter Moffatt, 2005. "Stochastic Choice and the Allocation of Cognitive Effort," Experimental Economics, Springer;Economic Science Association, vol. 8(4), pages 369-388, December.
    5. Wilcox, Nathaniel T, 1993. "Lottery Choice: Incentives, Complexity and Decision Time," Economic Journal, Royal Economic Society, vol. 103(421), pages 1397-1417, November.
    6. Ruitao Gu & Qiaoyun Zhang & Wei Zhou & Jianxu Liu, 2022. "Judging the True Health of Finance Institutions Based on Risk Behavior and Operation Performance," Mathematical Problems in Engineering, Hindawi, vol. 2022, pages 1-21, November.

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