What Drives People Risk-seeking? Puzzling Evidence from Chinese Lottery Market
What Drives People Risk-seeking?
Puzzling Evidence from Chinese Lottery Market
We explore a Chinese individual level lottery betting data (China Super Lotto) to examine the factors which affect people's risk preference. The popular Chinese Super Lotto Lottery game is similar to the lotteries in other countries except that there is a cap policy on the grand prize, which limits the reward of each jackpot winner. We prove that this complex cap-policy actually makes this lottery game become a fixed prize game for the majority of the time no matter how the lottery rollover money from the previous round fluctuates. Then, we take a further step and examine whether and how this irrelevant rollover money affects people's pairwise choice between "risky" bet and the "safe" bet by exploiting another special policy of this Chinese lottery game. Specifically, in the Super Lotto, lottery players can choose to bet at the normal ticket price of 2 RMB or to add 1 RMB on each ticket in exchange to get 60% additional reward if it wins. We find that in this fixed prize game, higher rollover will make people more risk-seeking, investing relatively more in "risky" choices. In the robustness check, when we use the aggregate level data, this puzzling result still holds.
Jia Yuan is presently an associate professor in the University of Macau. He received his PhD in Economics at the University of Minnesota, and his B.A. in physics from Beijing University. Yuan's academic interest is empirical industrial organization, applied economics and lottery.