Measuring the Output and Prices of the Lottery Sector: An Application of Implicit Expected Utility Theory

Kam Yu

No 14020, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using implicit expected utility theory, a money metric of utility derived from playing a lottery game is developed. Output of the lottery sector can be defined as the difference in utility with and without the game. Using a kinked parametric functional form, outputs of the Canadian Lotto 6/49 are estimated. Results show that this direct economic approach yield an average output which is almost three times of the official GDP, which takes total factor costs as output. A by-product of the estimation is an implicit price index for lottery, which can serve as a cost-of-living index for the CPI. The estimated price elasticity of demand -0.67 closely resembles results for the U.K. and Israel in previous studies.

JEL-codes: C43 D81 L83 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-upt
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Published as Measuring the Output and Prices of the Lottery Sector: An Application of Implicit Expected Utility Theory , Kam Yu. in Price Index Concepts and Measurement , Diewert, Greenlees, and Hulten. 2009

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