Valuing Goods Allocated via Dynamic Lottery

Carson Reeling, Valentin Verdier and Frank Lupi

Journal of the Association of Environmental and Resource Economists, 2020, vol. 7, issue 4, 721 - 749

Abstract: Resource managers often use “dynamic lotteries” to allocate access to recreational opportunities. Under these lotteries, applicants’ probability of winning access increases with their seniority, earned by being unsuccessful in past drawings. Winning access means forfeiting one’s seniority. Hence, applicants under a dynamic lottery face intertemporal trade-offs in making their application choices and have incentives to be forward-looking. We use a structural dynamic discrete choice model to estimate willingness to pay (WTP) for black bear hunting opportunities in Michigan, permits for which are allocated via dynamic lottery. We show that forward-looking behavior has important implications for welfare estimation. We also extend prior work by deriving a theoretically consistent measure of applicants’ marginal WTP for quality characteristics of lottery-rationed goods.

Date: 2020
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