Preference for Skew in Lotteries: Evidence from the Laboratory

Thomas Astebro, José Mata () and Luis Santos-Pinto ()

Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP

Abstract: Using a laboratory experiment we investigate how skew inuences choices under risk. We find that subjects make significantly riskier choices when the distribution of payoffs is positively skewed, these choices being driven in part by the shape of the utility function but also by subjective distortion of probabilities. A utility model with probability distortion calibrated on laboratory data is able to explain why most gamblers in public lotteries buy only a small number of tickets.

Keywords: risk; skew; gambling; lab experiment (search for similar items in EconPapers)
JEL-codes: D81 C91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-pke
Date: 2009-06

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Related works:
Working Paper: Preference for Skew in Lotteries: Evidence from the Laboratory (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:lau:crdeep:09.09

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