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The Utility of Gambling

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  • Conlisk, John

Abstract

A tiny utility of gambling is appended to an expected utility model for a risk-averse individual. It is shown that the model can explain small payoff gambles, large prize lotteries, and patterns of risk-seeking in the experimental evidence that are puzzling from the viewpoint of standard theory. At the same time, the model maintains expected utility theory's ability to explain insurance purchase, portfolio diversification, and other risk-averting behavior. The tiny utility of gambling could equally well be appended to models of risky choice other than the expected utility model. Copyright 1993 by Kluwer Academic Publishers

Suggested Citation

  • Conlisk, John, 1993. "The Utility of Gambling," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 255-275, June.
  • Handle: RePEc:kap:jrisku:v:6:y:1993:i:3:p:255-75
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    References listed on IDEAS

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    3. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151-151.
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    7. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
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