2004-12-01
The Utility of Gambling Reconsidered
Publication
Publication
Journal of Risk and Uncertainty , Volume 29 - Issue 3 p. 241- 259
The utility of gambling, which entails an intrinsic utility or disutility of risk, has been alluded to in the economics literature for over a century. This paper demonstrates that any utility of gambling almost unavoidably implies a violation of fundamental rationality properties, such as transitivity or stochastic dominance, for static choices between gambles. This result may explain why the utility of gambling, a phenomenon so widely discussed, has never been formalized in the economics literature. The model of this paper accommodates well-known deviations from expected utility, such as the Allais paradox and the coexistence of gambling and insurance, while minimally deviating from expected utility.
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doi.org/RISK.0000046145.25793.37, hdl.handle.net/1765/22984 | |
ERIM Article Series (EAS) | |
Journal of Risk and Uncertainty | |
Organisation | Erasmus Research Institute of Management |
Diecidue, E., Schmidt, U., & Wakker, P. (2004). The Utility of Gambling Reconsidered. Journal of Risk and Uncertainty, 29(3), 241–259. doi:RISK.0000046145.25793.37 |