The piecewise power value function proposed by Kahneman and Tversky is inconsistent with both theoretical and experimental work. We propose the expo-power function as an alternative to the power function and examine its ability to explain choices in Allais experiments.

The purpose in this letter is to demonstrate, employing two parametric forms of the Markowitz model of utility, that heterogeneity of preferences of Markowitz agents can contribute towards an explanation of why lotteries typically have multiple rather than single prizes.

We demonstrate theoretically and illustrate the implications of assuming power utility when the true function is of the expo-power form. Empirical results can appear to be consistent with cumulative prospect theory when they are in fact generated from a Markowitz model.

Long memory processes can occur as a consequence of aggregation over heterogeneous agents. We examine the UK lottery and, by estimating the level of fractional differencing, find evidence of the long memory property in lottery sales, a result that has broader implications on the estimation of...

Jackpot size has a greater impact than expected price as a determinant of lottery sales suggesting that agents exhibit irrational lotto mania. We demonstrate why this conclusion is problematical by considering the reduced form obtained if agents are described by Cumulative Prospect Theory.