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Agents' Models and Participation in a Gambling Market


  • Krautmann, Anthony C.

    (De Paul University)


This paper explains the economics of gambling behavior within a framework which explicitly incorporates agents' models and attitude toward risk. Within this framework, we characterize the formation of subjective probabilities, the equilibrium in a pointspread gambling market, and how the diversity in beliefs opens up the market to more risk-averse individuals. In addition, we derive the individual's reservation pointspread as a function of his degree of risk aversion.

Suggested Citation

  • Krautmann, Anthony C., 1995. "Agents' Models and Participation in a Gambling Market," Eastern Economic Journal, Eastern Economic Association, vol. 21(2), pages 239-246, Spring.
  • Handle: RePEc:eej:eeconj:v:21:y:1995:i:2:p:239-246

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    Belief; Equilibrium; Gambling; Probabilities; Risk Averse; Risk Aversion; Risk;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism


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