The Market for Sweepstakes

Soo Hong Chew and Guofu Tan

The Review of Economic Studies, 2005, vol. 72, issue 4, 1009-1029

Abstract: This paper studies the market for monopolistically supplied sweepstakes. We derive equilibrium demands for fixed-prize and variable-prize sweepstakes and determine the profit-maximizing prize level and pay-out ratio respectively. It can be profitable to offer each type of sweepstake when there is a large enough number of weighted utility consumers who have constant absolute risk attitudes, are strictly averse to small as well as symmetric risks, and display longshot preference behaviour. Moreover, for the variable-prize sweepstake, the supplier will generally find it profitable to combine sweepstakes targeting two smaller populations, and offer a single sweepstake to the combined population. This implication is corroborated by the recent spate of mergers of smaller state lotteries into larger ones. Copyright 2005, Wiley-Blackwell.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1111/0034-6527.00359 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Market for Sweekstakes (2004)
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:oup:restud:v:72:y:2005:i:4:p:1009-1029

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().