Optimal lottery
Lotteries are considered that belong to the set of Pareto equilibria between a firm and a consumer with rank-dependent utility (RDU). It is shown that the continuity of the lotteries is necessary for their compatibility with RDU, and that under realistic assumptions the optimal prize structure follows a power law distribution. The theoretical results are discussed in the context of real lotteries.
scientific article; zbMATH DE number 6376373