2014/09/01 by Michael A. Trousdale, Richard A. Dunn
Economics, Econometrics and Finance · Business, Management and Accounting · #Economics of Agriculture and Food Markets #Consumer Market Behavior and Pricing #Economic theories and models
paper · doi:10.17310/ntj.2014.3.04
This article introduces a new approach to analyzing whether lottery games are complements or substitutes, and whether a portfolio of lottery games is optimally priced. We estimate Barten's synthetic differential demand system for the on-line lottery games operated by the Texas Lottery Commission. The demand system approach imposes theory-consistent demand restrictions that allow identification of parameters for games without price variation. We use the estimated parameters from the Barten model to construct expenditure and price elasticities. Results indicate that on-line games in Texas are generally substitutes for one another and the portfolio of games is not priced to maximize profit.