Lottery pricing under time pressure

Pavlo R. Blavatskyy and Wolfgang R. K�hler

No 422, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: 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.

Keywords: Time pressure; certainty equivalent; experiment; stochastic; Becker-DeGroot- Marschak (BDM) method (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-cbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:422

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