Examining the gambling behaviors of Chinese online lottery gamblers: are they rational?

In this research, we explore a unique Chinese peer to peer (P2P) online lottery gambling data (n = 388,123) and examine the rationality of Chinese online lottery gamblers. We show that Chinese online lottery gamblers are irrational in the sense that they are significantly affected by the lottery winning history of others even though this winning history is shown to be merely an exogenous random shock. Specifically, in this Chinese P2P online lottery gambling game, some of the lottery gamblers (named the proposers) propose lottery packages first, and then, other lottery gamblers (named the followers) will follow by choosing among the different packages and deciding on how much to purchase. The past lottery winning return rate of each proposer is provided as public information and calculated as the ratio between her past winning money and wager. It is shown that this past return rate is merely a random shock because winning in the past cannot predict anything about the performance in the future. However, we find that Chinese online P2P lottery gamblers are significantly more likely to join a lottery package if it is proposed by proposers with higher return rates.