Extreme Events and the Cumulative Distribution of Net Gains in Gambling and Structured Products

Applied Economics, Volume 50, 2018 - Issue 58.

37 Pages Posted: 21 Jan 2021

See all articles by Frédéric D. Vrins

Frédéric D. Vrins

Louvain Finance Center (LFIN), UC Louvain; Center for Operations Research and Econometrics (CORE), UC Louvain

Mikael Petitjean

Catholic University of Lille - IÉSEG School of Management, Lille Campus; Lille Economie & Management (LEM) UMR 9221; Louvain School of Management (UCL); Catholic University of Louvain (UCL) - Louvain Finance (LFIN)

Date Written: May 25, 2018

Abstract

We argue that ethical principles in advertising and market communication cannot be properly discovered and applied to gambling without a deep understanding of its probabilistic implications, in particular when extreme events are influential. We carry out a probabilistic analysis of lottery games with lifetime prizes in order to derive sound recommendations about the pertinent information that should be communicated to nudge gamblers. We propose to focus on the cumulative distribution of net gains, for which there is currently no information available to gamblers. This holds true for structured products in which extreme events matter as well.

Keywords: Extreme events, ethical communication, distribution of gains, simulations, gambling, lotteries, structured products

JEL Classification: G00

Suggested Citation

Vrins, Frederic Daniel and Petitjean, Mikael, Extreme Events and the Cumulative Distribution of Net Gains in Gambling and Structured Products (May 25, 2018). Applied Economics, Volume 50, 2018 - Issue 58., Available at SSRN: https://ssrn.com/abstract=3769130

Frederic Daniel Vrins

Louvain Finance Center (LFIN), UC Louvain ( email )

Voie du Roman Pays 34
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://www.uclouvain.be/frederic.vrins

Center for Operations Research and Econometrics (CORE), UC Louvain ( email )

Voie du Roman Pays 34
Louvain-la-Neuve,, B-1348
Belgium

Mikael Petitjean (Contact Author)

Catholic University of Lille - IÉSEG School of Management, Lille Campus ( email )

3 rue de la Digue
Lille, 59000
France
0032497301266 (Phone)
59000 (Fax)

Lille Economie & Management (LEM) UMR 9221 ( email )

Lille
France

Louvain School of Management (UCL) ( email )

Belgium

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

34 Voie du Roman Pays - L1.03.01
Louvain-la-Neuve, 1348
Belgium

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