On correlated lotteries in economic applications

Markus Dertwinkel-Kalt, Sebastian Ebert and Mats Köster

Journal of Economic Behavior & Organization, 2023, vol. 215, issue C, 292-306

Abstract: Economic models and experiments frequently use lotteries with only a few outcomes. We study the correlation of such lotteries and discuss its relevance for economic applications. In particular, we fully characterize the joint distribution of two binary lotteries via their first three univariate moments and their correlation coefficient. As we illustrate alongside several examples, the resulting parametrization may be useful for economic modeling and experimental design.

Keywords: Binary lotteries; Correlation; Correlation neglect; Attention; Portfolio choice (search for similar items in EconPapers)
JEL-codes: C90 D01 D81 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:215:y:2023:i:c:p:292-306

DOI: 10.1016/j.jebo.2023.08.025

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