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University of Florida Thesis Or Dissertation Formatting SPORTS GAMBLING AS CONSUMPTION: AN ECONOMETRIC ANALYSIS OF DEMAND FOR SPORTS LOTTERY By LUNHUA MAO A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 2013 1 © 2013 Lunhua Mao 2 To my family and friends for their unwavering support and encouragement over the years 3 ACKNOWLEDGMENTS I would never have been able to finish my dissertation without the guidance of my committee members, help from friends, and support from my family and wife. I would like to express my deepest gratitude to my mentor, Dr. James Zhang, for his excellent guidance, caring, patience and support during the past four years, and for investing much time, effort and interest in this research project. I would also like to thank Dr. Dan Connaughton for his willingness to chair my committee after Dr. Zhang moved to the University of Georgia, for his advice, encouragement, and support over the years. I am fortunate to have these two advisors in my life and am truly indebted for their guidance. I would like to give special thanks to Dr. Steven Shugan, who was more than generous with his expertise and precious time. I benefited tremendously from his inspiring writings, lectures and comments. I am also grateful to my other committee members, Dr. Stephen Holland, Dr. J. O. Spengler, and Dr. Beth Cianfrone, for providing numerous hours of advice and critiques. I would like to thank Dr. Hai Li at the Shanghai University of Sport for providing me some valuable research materials. I would like to thank my friends and fellow doctoral students at UF for their support, feedback, and friendship. Finally, I thank my parents, my sisters, and my wife for their love and continuing support. 4 TABLE OF CONTENTS page ACKNOWLEDGMENTS .................................................................................................. 4 LIST OF TABLES ............................................................................................................ 8 LIST OF FIGURES .......................................................................................................... 9 LIST OF ABBREVIATIONS ........................................................................................... 10 ABSTRACT ................................................................................................................... 11 CHAPTER 1 INTRODUCTION .................................................................................................... 13 Significance of Sports Gambling Industry ............................................................... 13 Need for Empirical Demand Research.................................................................... 15 Statement of Problem ............................................................................................. 18 Purpose of the Study .............................................................................................. 22 Significance of the Study ........................................................................................ 22 Delimitations of the Study ....................................................................................... 23 Definition of Terms .................................................................................................. 24 2 REVIEW OF LITERATURE .................................................................................... 26 Gambling, Lottery, and Sport .................................................................................. 26 Gambling .......................................................................................................... 26 Lottery .............................................................................................................. 28 Sports Gambling ............................................................................................... 32 Lottery Gambling in China ...................................................................................... 36 Theory of Demand and Utility of Lottery Gambling ................................................. 40 Expected Utility Theory and its Generalizations ............................................... 41 Indivisibility in Expenditure Hypothesis ............................................................. 43 Consumption Utility Hypotheses ....................................................................... 47 Determinants of Lottery Demand ............................................................................ 51 Product Attributes and Demand ....................................................................... 51 Effective price ............................................................................................ 51 Jackpot size ............................................................................................... 55 Estimation problems .................................................................................. 58 Game attractiveness .................................................................................. 61 Consumer Characteristics and Demand ........................................................... 61 Income ....................................................................................................... 61 Age ............................................................................................................ 65 Education ................................................................................................... 66 5 Gender ....................................................................................................... 68 Religion ...................................................................................................... 68 Ethnicity ..................................................................................................... 69 Marketing Variables and Demand .................................................................... 70 Border competition ..................................................................................... 70 Product substitution ................................................................................... 72 Venue accessibility .................................................................................... 74 Social responsibility marketing ................................................................... 75 Summary .......................................................................................................... 76 3 METHOD ................................................................................................................ 78 Background about Shengfu game .......................................................................... 78 Econometric Framework ......................................................................................... 81 Decision Calculus ............................................................................................. 81 Prize Pool ......................................................................................................... 82 Risk of Prize Sharing ........................................................................................ 83 Expected Prizes ............................................................................................... 85 Relationships between Expected Value and its Determinants.......................... 85 Empirical Models .................................................................................................... 86 Time Series Analysis ........................................................................................ 86 Derivation of effective price ........................................................................ 87 Derivation of prediction difficulty coefficient ............................................... 87 Derivation of ticket composition variables .................................................. 88 Marketing and game feature dummies ....................................................... 90 Panel Data Analysis ......................................................................................... 90 Population and population compositions .................................................... 90 Derivation of the income variable ............................................................... 91 Derivation of the sport variable .................................................................. 91 Venue accessibility .................................................................................... 92 Method of estimation .................................................................................. 92 4 RESULTS ............................................................................................................. 103 Results of Time Series Analysis ........................................................................... 103 Stationarity, Autocorrelation, and Dynamic Specification ............................... 105 Ordinal Least Squares Results ....................................................................... 107 Instrumental Variables Results ....................................................................... 110 Using CAP as Instrument ............................................................................... 111 Results of Panel Data Analysis ............................................................................. 113 Pooled Models ................................................................................................ 113
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