A Theory of the Gambling Effect

E. Diecidue, U. Schmidt, P.P. Wakker

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Abstract

This paper presents a model for the "gambling effect," i.e., the effect that risky gambles are evaluated differently than riskless outcomes due to an intrinsic utility (or disutility) of gambling.The model turns out to violate stochastic dominance and therefore its primary applications will be descriptive. It sheds new light on empirical observations of risk attitudes and provides new insights into the distinction between risky and riskless utility.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages32
Volume2000-75
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-75

Keywords

  • rank dependence
  • comonotonicity
  • Choquet integral
  • pessimism
  • uncertainty
  • aversion
  • prospect theory

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