Abstract:

In a series of experiments, we demonstrate that people are reluctant to exchange lottery tickets. In other words, when given a small incentive to exchange a lottery ticket with which they had just been endowed for a different one, with the same probability of winning the same prize, only about 50% choose to do so. In contrast, when given the same incentive to exchange a pen with which they had just been endowed for another pen just like it, over 90% choose to do so. We discuss – and rule out – a series of possible explanations for this effect, including: distorted subjective probabilities; fear of finding out that you gave up a wining ticket; lack of sufficient incentive (i.e.,transaction cost); general confusion or "paranoia"; etc. We conclude that people will not exchange ex ante identical tokens of the same type unless the two tokens will be identical ex post as well. A lottery ticket with which one has been endowed becomes at once the status quo, or reference point, with respect to which changes are evaluated for possible gains and losses. Since losses loom larger than gains, two lottery tickets which are symmetrical before they pass into one's possession are no longer symmetrical once one of them becomes one's own.

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