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On the Necessity of Using Lottery Qualities

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  • Yves Alarie
  • Georges Dionne

Abstract

The aim of this paper is to propose a model of decision-making for lotteries. The key element of the theory is the use of lottery qualities. Qualities allow the derivation of optimal decision-making processes and are taken explicitly into account for lottery evaluation. Our contribution explains the major violations of the expected utility theory for decisions on two-point lotteries and shows the necessity of giving explicit consideration to the lottery qualities.

Suggested Citation

  • Yves Alarie & Georges Dionne, 2004. "On the Necessity of Using Lottery Qualities," Cahiers de recherche 0415, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0415
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    References listed on IDEAS

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    Cited by:

    1. Yves Alarie & Georges Dionne, 2006. "Lottery qualities," Journal of Risk and Uncertainty, Springer, vol. 32(3), pages 195-216, May.

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    More about this item

    Keywords

    Lottery choice; common ratio; preference reversal; pricing; lottery test; cognitive process; certainty equivalent; lottery quality;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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