Abstract
Decision making often entails longshot risks involving a small chance of receiving a substantial outcome. People tend to be risk preferring (averse) when facing longshot risks involving significant gains (losses). This differentiation towards longshot risks underpins the markets for lottery as well as for insurance. Both lottery and insurance have emerged since ancient times and continue to play a useful role in the modern economy. In this study, we observe subjects' incentivized choices in a controlled laboratory setting, and investigate their association with a widely studied, promoter-region repeat functional polymorphism in monoamine oxidase A gene (MAOA). We find that subjects with the high activity (4-repeat) allele are characterized by a preference for the longshot lottery and also less insurance purchasing than subjects with the low activity (3-repeat) allele. This is the first result to link attitude towards longshot risks to a specific gene. It complements recent findings on the neurobiological basis of economic risk taking.
Highlights
In one form or another, longshot risks touch the lives of everyone
Subjects We recruited a cohort of 350 Han Chinese subjects in Beijing through internet advertisement, posters and word of mouth to assess their risk attitude and genotype the monoamine oxidase A gene (MAOA) polymorphism
We test the effect of MAOA on lottery and insurance purchase with four controls – age, gender, student status and education – and find that it is significantly associated with longshot preference, and marginally associated with insurance purchasing
Summary
In one form or another, longshot risks touch the lives of everyone. Sweepstakes or lucky draws are often bundled with the purchase of goods such as magazines, credit cards, automobiles, even homes. Because lotteries are invariably priced higher than their expected payoffs, they are used to raise revenues for charities, clubs, organizations, and governments. We say that lottery consumers are risk seeking when they pay more than the expected payoffs in purchasing lottery products. In lottery markets, e.g., racetrack betting, there is a tendency for consumers to exhibit a preference for longshot – valuing longshot bets with higher odds more than favorites with lower odds when expected payoffs are similar [1,2]
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