Lottery pricing under time pressure |
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Authors: | Pavlo R Blavatskyy Wolfgang R Köhler |
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Institution: | (1) ABB AB High Voltage, 371 23 Cables, Karlskrona, Sweden |
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Abstract: | This article 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 cannot 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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