Working Paper: CEPR ID: DP7715
Authors: Martin Kocher; Michal Krawczyk; Frans Aam van Winden
Abstract: We analyze one of the explanations why people participate in lotteries. Our hypothesis stipulates that part of the value that a unit of money buys in lotteries is consumed before the actual resolution in the form of emotions such as hope. In other words, a person holding a lottery ticket may prefer a delayed resolution of risk due to positive anticipatory emotions. This conjecture is tested in an experiment with real lottery tickets. We show that our theoretical considerations may contribute to explaining empirical puzzles associated with lottery participation, timing of resolution and the spreading of drawings. More specifically, we find that a substantial number of participants prefer delayed resolution, that anticipated thrill is the main variable explaining this choice, that emotions actually experienced during the waiting period are indeed predominantly positive and correlated with predictions. Finally, we find that a great majority prefers to `spread' chances, that is, to obtain one ticket for each of two drawings rather than two for the same drawing.
Keywords: anticipation; experiment; lotteries
JEL Codes: C93; D81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| anticipation of positive emotions (D84) | preference for delayed resolution (D15) |
| positive emotions during waiting period (I31) | preference for delayed resolution (D15) |
| anticipation of thrill (D84) | preference for delayed resolution (D15) |