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Lottery pricing under time pressure


Blavatskyy, Pavlo R; Köhler, Wolfgang R (2009). Lottery pricing under time pressure. Working paper series / Institute for Empirical Research in Economics No. 422, University of Zurich.

Abstract

This paper investigates how subjects determine minimum selling prices for lotteries. We design an experiment where subjects have at every moment an incentive to state their minimum selling price and to adjust the price if they believe that the price that they stated initially was not optimal. We observe frequent and sizeable price adjustments. We find that random pricing models can not explain the observed price patterns. We show that earlier prices contain information about future price adjustments. We propose a model of Stochastic Pricing that offers an intuitive explanation for these price adjustment patterns.

Abstract

This paper investigates how subjects determine minimum selling prices for lotteries. We design an experiment where subjects have at every moment an incentive to state their minimum selling price and to adjust the price if they believe that the price that they stated initially was not optimal. We observe frequent and sizeable price adjustments. We find that random pricing models can not explain the observed price patterns. We show that earlier prices contain information about future price adjustments. We propose a model of Stochastic Pricing that offers an intuitive explanation for these price adjustment patterns.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:July 2009
Deposited On:29 Nov 2011 20:09
Last Modified:12 Aug 2017 12:46
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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