The Near Miss Effect and the Framing of Lotteries

Michael Crystal

Papers from arXiv.org

Abstract: We present a framework for analyzing the near miss effect in lotteries. A decision maker (DM) facing a lottery, falsely interprets losing outcomes that are close to winning ones, as a sign that success is within reach. As a result of this false belief, the DM will prefer lotteries that induce a higher frequency of near misses, even if the underlying probability of winning is constant. We define a near miss index that measures the near miss effect induced by a given lottery and analyze the optimal lottery design in terms of near miss. This analysis leads us to establish a fruitful connection between our near miss framework and the field of coding theory. Building on this connection we compare different lottery frames and the near miss effect they induce. Analyzing an interaction between a seller and a buyer of lotteries allows us to gain further insight into the optimal framing of lotteries and might offer a potential explanation as to why lotteries with a very small probability of winning are commonplace and attractive.

Date: 2021-07, Revised 2023-12
New Economics Papers: this item is included in nep-mic and nep-upt
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2107.02478 Latest version (application/pdf)

Related works:
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:arx:papers:2107.02478

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().