Raising Revenue With Raffles: Evidence from a Laboratory Experiment

Alexander Matros, Wooyoung Lim and Theodore Turocy ()

No 377, Working Papers from University of Pittsburgh, Department of Economics

Abstract: Lottery and raffle mechanisms have a long history as economic institutions for raising funds. In a series of laboratory experiments we find that total spending in raffles is much higher than Nash equilibrium predicts. Moreover, this overspending is persistent as the number of participants in the raffle increases. Subjects as a group do not strategically reduce spending as group sizes increase, in contrast to the comparative statics theory provides. The lack of strategic response cannot be explained by learning direction theory or level-$k$ reasoning models, although quantal response equilibrium can fit the observed distribution of choices. Much of the observed spending levels in the larger groups cannot be explained by financial incentives.

JEL-codes: C72 C92 D72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2009-02, Revised 2009-02
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Persistent link: http://EconPapers.repec.org/RePEc:pit:wpaper:377

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