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A process approach to the utility for gambling

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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File URL: http://www.econ.upf.edu/docs/papers/downloads/570.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 570.

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Date of creation: Sep 2001
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Handle: RePEc:upf:upfgen:570
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Sen, A., 1996. "Maximisation and the Act of Choice," Papers 270, Banca Italia - Servizio di Studi.
  2. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.
  4. 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.
  5. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-38, October.
  6. Sen, Amartya, 1995. "Rationality and Social Choice," American Economic Review, American Economic Association, vol. 85(1), pages 1-24, March.
  7. Peter Fishburn & Peter Wakker, 1995. "The Invention of the Independence Condition for Preferences," Management Science, INFORMS, vol. 41(7), pages 1130-1144, July.
  8. Conlisk, John, 1993. " The Utility of Gambling," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 255-75, June.
  9. Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, vol. 42(8), pages 1131-1150, August.
  10. Peter Fishburn, 1980. "A simple model for the utility of gambling," Psychometrika, Springer, vol. 45(4), pages 435-448, December.
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