Journal of Risk and Uncertainty

, Volume 7, Issue 3, pp 311–324

On a lottery pricing anomaly: Time tells the tale

Authors

  • Nathaniel T. Wilcox
    • Department of EconomicsUniversity of Houston
Article

DOI: 10.1007/BF01079630

Cite this article as:
Wilcox, N.T. J Risk Uncertainty (1993) 7: 311. doi:10.1007/BF01079630

Abstract

This article identifies a lottery pricing anomaly, which I call the “r=x anomaly,” that is present in past pricing experiments—namely, a tendency for subjects to announce that their minimum selling price for some binary lottery is the greater of the two lottery prizes. The study shows that the anomaly is inconsistent with two theoretical explanations for another well-known pricing anomaly (preference reversal) and experimentally replicates these inconsistencies. The new experiment also measures the time subjects spend making their pricing decisions. These decision-time measurements suggest that ther=x anomaly may be a decision-cost effect.

Key words

anomaliesdecision costexperimental methodsnonlinear modelsnontransitive models

JEL classification numbers

C91D81

Copyright information

© Kluwer Academic Publishers 1994