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On the Necessity of Using Lottery Qualities

Yves Alarie and Georges Dionne

Cahiers de recherche from CIRPEE

Abstract: 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)
Date: 2004
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