Article

Journal of Risk and Uncertainty

, Volume 37, Issue 1, pp 57-75

Myopic risk-seeking: The impact of narrow decision bracketing on lottery play

  • Emily HaisleyAffiliated withDepartment of Organizational Behavior and Theory, Carnegie Mellon University
  • , Romel MostafaAffiliated withDepartment of Social and Decision Sciences, Carnegie Mellon University
  • , George LoewensteinAffiliated withDepartment of Social and Decision Sciences, Carnegie Mellon University Email author 

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Abstract

In two experiments conducted with low-income participants, we find that individuals are more likely to buy state lottery tickets when they make several purchase decisions one-at-a-time, i.e. myopically, than when they make one decision about how many tickets to purchase. These results extend earlier findings showing that “broad bracketing” of decisions encourages behavior consistent with expected value maximization. Additionally, the results suggest that the combination of myopic decision making and the “peanuts effect”—greater risk seeking for low stakes than high stakes gambles—can help explain the popularity of state lotteries.

Keywords

Decision framing Bracketing State lotteries Myopic loss aversion Peanuts effect Gambling

JEL Classification

C91 D81 I30