Abstract
We study two-stage lotteries wherein, in the first stage, the consumer may be awarded a lottery ticket for some choices and, in the second stage, some of the lottery tickets win prizes. In a series of Internet experiments, we examine store choice and repeat visits in response to immediate and two-stage lottery incentives. We show that a delayed resolution of uncertainty may dramatically increase the desired response over immediate resolution. However, this effect is due to an interaction of several potentially contradictory effects. When prizes are frequent, the effectiveness of the two-stage lottery is expected to decline.
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