Microeconomics in a qualitative study! Isn’t it interesting that “rationality” doesn’t seem to be part of peoples’ preference structure at all?
Business Insider trying to buy lottery tickets from people and even offering double the price paid. Think back to what you learned in Game Theory? What would be the dominant strategy here?
I guess, the interesting part in this is what could be results if looked at this as a qualitative study. That people would never prove the hypothesis of behaving utility-maximising in the form of maximising monetary return in a quantitative study is shown often enough. But lets use the Business Insider video as a qualitative methodology of seeing something else but mere proving a hypothesis:
We see people reacting bewildered, surprised. Respondents to Sara Sliverstein’s question often have a hard time comprehending her proposal. They would, “no way” give away their ticket. They actually seem to believe to win with the exact ticket they just bought, which is plain to see completely irrational and unlikely to happen. Still, for those people buying the tickets it seems like a good idea to buy them. Spending money on those tickets might be giving them some reward or some security. And they are out protecting it from anyone who wants to buy it from them. The piece of paper they just bought essentially becomes worth “$ 700 Million” as one respondent puts it. But at what instant does the piece of paper attain that worth?
I know next to nothing about lottery tickets. But I have friends who do. And when they go buy some, they go to our local store here, pay some amount and then the cashier hands them each an envelope. That envelope they open, they scratch away a thin layer and underneath it tells them their price through a weird use of symbols of apples, bananas and other fruit. Having similar ones in a row signifies larger payout than initial price (as far as I got it, might be mixing things up here).
Where in that line of actions did the envelope with enclosing piece of paper attain its value then?
Still, I am searching. What I do know though. Other than with other assets, those pieces of paper my friends buy loose their value right at the instant they have scratched the layer away and found no similar fruit in any row. They would probably even give this now worthless piece of paper to me as a gift if I asked it of them.
Same goes with lotteries where randomised marbles with engraved numbers are drawn from a pot by the hands of mostly pretty ladies (see here also the theme of fortune and gambling being associated with femininity and lust whilst calculated risk-taking implies masculinity and bravery) That gives us a huge hint! Apparently lottery tickets loose their value if it is clear it bears none. Once, it is certain that it holds no value. To put it differently: That knowledge of the paper’s value is first established once it isn’t uncertain anymore.
Now, lets do a thought experiment here: What if nobody ever would take out the marbles from that pen of numbered glass-balls? And if I were to tell people that – by rule of law – these tickets had some value or rather that it’s value didn’t decrease over time and if people would actually believe me. Than we have essentially established fiat currency, by using a step that is equally described as “removing uncertainty” or “establishing certainty”.
Lottery tickets apparently aren’t tradable, though. If the notion is right and a lottery ticket in some sense holds the value of the maximum payout of that specific drawing, then maybe they are just a super illiquid market because you have to buy such large clips?
So there must be something else attaching value other than certainty, though. And I feel that is something only people who gamble, play, mess around, try out, use creative solutions know: Hope.
Now, that is a lot of interpretation. But why not ask people why they’re not giving up their probability-payout-wise worthless pieces of paper? Or check socio-economics of those people. How do they react if they’re not alone? How is gambling rooted in their family? Do they use similar logic to make life-decisions?
I’d be interested in what people had to tell!