Effects of Payment Timing and Prior Outcomes on the Composition of Choices over Public Lotteries

Abstract

This note investigates payment timing and prior outcome effects on individual choice under uncertainty using a two - year dataset containing more than 29,000 individual discrete choices over 128 annual lotteries for big-game (elk) hunting licenses in the southwest United States. In the first year, lottery applicants were required to prepay for licenses, and in the second year , the prepayment rule was removed, resulting in a more than twofold increase in the number of applicants. Results from nonparametric hypothesis tests indicate significant differences in the composition of lottery choices between new and prior applicants and between applicants who were drawn versus not drawn before the prepayment rule was removed. The findings contribute to experimental evidence that decisions made under uncertainty may be affected by the administrator’s choice of payment mechanism and the subject’s gains or losses from earlier choices.