Lottery qualities

Yves Alarie and Georges Dionne ()
Additional contact information
Yves Alarie: HEC Montreal, Canada Research Chair in Risk Management

No 06-7, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: The aim of this paper is to propose a model of decision-making for lotteries. Lottery qualities are the key concepts of the theory. 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 lottery qualities. Judged certainty equivalent and choice certainty equivalent concepts are discussed in detail along with the comparison of lotteries. Examples are provided by using different test results in the literature.

Keywords: Lottery choice; common ratio; preference reversal; pricing; lottery test; cognitive process; certainty equivalent (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2006-05-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.risksresearch.com/_files/ugd/a6eed3_d8 ... 90824f49ba19d285.pdf Full text (application/pdf)

Related works:
Journal Article: Lottery qualities (2006)
Working Paper: Lottery Qualities (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2006_007

Access Statistics for this paper

More papers in Working Papers from HEC Montreal, Canada Research Chair in Risk Management Contact information at EDIRC.
Bibliographic data for series maintained by Claire Boisvert ().