Extending the Mean-Variance Framework to Test the Attractiveness of Skewness in Lotto Play

Catriona Purfield and Patrick Waldron
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Patrick Waldron: Postal: Department of Economics, Trinity College, Dublin 2, Ireland

Economics Technical Papers from Trinity College Dublin, Economics Department

Abstract: Economic theory proposes that consumers are primarily concerned with increasing the mean and reducing the variance of the payoff when choosing between products the return to which is uncertain. This approach fails to explain the popularity of Lotto and other forms of gambling. The highly skewed prize distribution of the Lotto game suggests a case for extending the theory of choice in mean-variance space to include a third dimension, skewness. Empirical examination of Lotto sales supports the case for the inclusion of skewness and other, non-monetary, variables in a demand function.

JEL-codes: D12 D81 L83 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduet:974

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