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The rationality of qualified lotteries


Frey, Bruno S; Osterloh, Margit; Rost, Katja (2023). The rationality of qualified lotteries. European Management Review, 20(4):698-710.

Abstract

A lottery (or random selection) is often considered to be irrational. However, a qualified lottery can lead to a second-order rationality on an institutional level. The main idea is to make use of uncertainty, either by exploiting existing fundamental uncertainty or by deliberately enlarging uncertainty through lotteries. In both cases, decision quality may be enhanced by increasing diversity and risk diversification, by decreasing biases and noise, and through a strong disempowering effect by the shadow of uncertainty. The paper shows the different ways in which qualified lotteries have been used in history, analyses why this procedure has been forgotten despite its clear advantages, and compares it with competitive selection mechanisms.

Abstract

A lottery (or random selection) is often considered to be irrational. However, a qualified lottery can lead to a second-order rationality on an institutional level. The main idea is to make use of uncertainty, either by exploiting existing fundamental uncertainty or by deliberately enlarging uncertainty through lotteries. In both cases, decision quality may be enhanced by increasing diversity and risk diversification, by decreasing biases and noise, and through a strong disempowering effect by the shadow of uncertainty. The paper shows the different ways in which qualified lotteries have been used in history, analyses why this procedure has been forgotten despite its clear advantages, and compares it with competitive selection mechanisms.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Sociology
Dewey Decimal Classification:300 Social sciences, sociology & anthropology
Scopus Subject Areas:Social Sciences & Humanities > Business and International Management
Social Sciences & Humanities > Strategy and Management
Language:English
Date:1 December 2023
Deposited On:27 Sep 2023 13:40
Last Modified:29 Jun 2024 01:39
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:1740-4754
OA Status:Closed
Publisher DOI:https://doi.org/10.1111/emre.12550