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Title:Do consumers gamble to convexify? PDF Logo
Authors:Crossley, Thomas F.
Low, Hamish
Smith, Sarah
Issue Date:2011
Series/Report no.:IFS working papers 11,07
Abstract:The combination of credit constraints and indivisible consumption goods may induce some riskaverse individuals to play lotteries to have a chance of crossing a purchasing threshold. One implication of this is that income effects for individuals who choose to play lotteries are likely to be larger than for the general population. Using UK data on lottery wins, other windfalls and durable good purchases, we show that lottery players display higher income effects than non-players but only amongst those likely to be credit constrained. This is consistent with credit constrained, risk-averse agents gambling to convexify their budget set.
Document Type:Working Paper
Appears in Collections:IFS Working Papers, Institute for Fiscal Studies (IFS)

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