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| Title: | | The utility of gambling reconsidered |
| Authors: | | Diecidue, Enrico Schmidt, Ulrich Wakker, Peter P. |
| Issue Date: | | 2004 |
| Citation: | | [Volume:] 29 [Issue:] 3 [Pages:] 241-259 [Journal:] Journal of risk and uncertainty : JRU [ISBN:] 0895-5646 |
| Abstract: | | 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. |
| Subjects: | | certainty effect utility of gambling risk aversion nonexpected utility |
| Persistent Identifier of the first edition: | | doi:10.1023/B:RISK.0000046145.25793.37 |
| Document Type: | | Article |
| Appears in Collections: | | Economists Online
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