On the Necessity of Using Lottery Qualities
Yves Alarie and
Cahiers de recherche from CIRPEE
The aim of this paper is to propose a model of decision-making for lotteries. The key element of the theory is the use of lottery qualities. 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 the lottery qualities.
Keywords: Lottery choice; common ratio; preference reversal; pricing; lottery test; cognitive process; certainty equivalent; lottery quality (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:0415
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