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A Process Approach to the Utility for Gambling

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  • Marc Le Menestrel

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Abstract

This paper argues that any specific utility or disutility for gambling must be excluded from expected utility because such a theory is consequential while a pleasure or displeasure for gambling is a matter of process, not of consequences. A (dis)utility for gambling is modeled as a process utility which monotonically combines with expected utility restricted to consequences. This allows for a process (dis)utility for gambling to be revealed. As an illustration, the model shows how empirical observations in the Allais paradox can reveal a process disutility of gambling. A more general model of rational behavior combining processes and consequences is then proposed and discussed.

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Bibliographic Info

Article provided by Springer in its journal Theory and Decision.

Volume (Year): 50 (2001)
Issue (Month): 3 (May)
Pages: 249-262

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Handle: RePEc:kap:theord:v:50:y:2001:i:3:p:249-262

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Web page: http://www.springerlink.com/link.asp?id=100341

Related research

Keywords: Gambling; Expected utility; Process utility; Rationality; Consequentialism;

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References

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  1. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
  2. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Donaldson, Cam & Shackley, Phil, 1997. "Does "process utility" exist? A case study of willingness to pay for laparoscopic cholecystectomy," Social Science & Medicine, Elsevier, vol. 44(5), pages 699-707, March.
  4. Sen, Amartya, 1995. "Rationality and Social Choice," American Economic Review, American Economic Association, vol. 85(1), pages 1-24, March.
  5. Peter Fishburn & Peter Wakker, 1995. "The Invention of the Independence Condition for Preferences," Management Science, INFORMS, INFORMS, vol. 41(7), pages 1130-1144, July.
  6. Amartya Sen, 1996. "Maximization and the Act of Choice," Harvard Institute of Economic Research Working Papers 1766, Harvard - Institute of Economic Research.
  7. Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, INFORMS, vol. 42(8), pages 1131-1150, August.
  8. Diecidue, E. & Schmidt, U. & Wakker, P.P., 2000. "A Theory of the Gambling Effect," Discussion Paper, Tilburg University, Center for Economic Research 2000-75, Tilburg University, Center for Economic Research.
  9. Fishburn, Peter C, 1989. " Retrospective on the Utility Theory of von Neumann and Morgenstern," Journal of Risk and Uncertainty, Springer, vol. 2(2), pages 127-57, June.
  10. Conlisk, John, 1993. " The Utility of Gambling," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 255-75, June.
  11. Peter Fishburn, 1980. "A simple model for the utility of gambling," Psychometrika, Springer, vol. 45(4), pages 435-448, December.
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Citations

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Cited by:
  1. Marc Le Menestrel, 2003. "A one-shot Prisoners’ Dilemma with procedural utility," Economics Working Papers 819, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Bruno S. Frey & Matthias Benz & Alois Stutzer, . "Introducing Procedural Utility: Not only What, but also How Matters," IEW - Working Papers 129, Institute for Empirical Research in Economics - University of Zurich.
  3. Bruno S. Frey & Alois Stutzer, . "Beyond Outcomes: Measuring Procedural Utility," IEW - Working Papers 076, Institute for Empirical Research in Economics - University of Zurich.
  4. Matthias Benz & Alois Stutzer, . "Do Workers Enjoy Procedural Utility?," IEW - Working Papers 127, Institute for Empirical Research in Economics - University of Zurich.
  5. Le Menestrel, Marc & Van Wassenhove, Luk N., 2004. "Ethics outside, within, or beyond OR models?," European Journal of Operational Research, Elsevier, Elsevier, vol. 153(2), pages 477-484, March.
  6. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
  7. Marc Le Menestrel & Luk Van Wassenhove, 2001. "The Domain and Interpretation of Utility Functions: An Exploration," Theory and Decision, Springer, Springer, vol. 51(2), pages 329-349, December.
  8. Bruno S. Frey & Alois Stutzer, 2001. "Beyond Bentham – Measuring Procedural Utility," CESifo Working Paper Series 492, CESifo Group Munich.
  9. Humphreys, Brad & Perez, Levi, 2011. "Lottery Participants and Revenues: An International Survey of Economic Research on Lotteries," Working Papers 2011-17, University of Alberta, Department of Economics.
  10. Bruno S. Frey & Matthias Benz, . "Being Independent is a Great Thing: Subjective Evaluations of Self-Employment and Hierarchy," IEW - Working Papers 135, Institute for Empirical Research in Economics - University of Zurich.
  11. R. Luce & C. Ng & A. Marley & János Aczél, 2008. "Utility of gambling I: entropy modified linear weighted utility," Economic Theory, Springer, Springer, vol. 36(1), pages 1-33, July.
  12. Marc Le Menestrel & Bertrand Lemaire, 2002. "Additive utility with intransitive indifference and without independence: A homogeneous case," Economics Working Papers 628, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Karelaia, Natalia, 2006. "Thirst for confirmation in multi-attribute choice: Does search for consistency impair decision performance?," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 100(1), pages 128-143, May.

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