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Title: The rationality of accepting compounds of unattractive gambles
Authors: Chew, Soo Hong
Epstein, Larry G.
Keywords: gamble;risk;theory of preference;law of large numbers
Issue Date: Jan-1987
Publisher: University of Toronto
Series/Report no.: Department of Economics and Institute for Policy Analysis working paper series;No. 8702
Abstract: A compound of many independent replicas of a gamble may be chosen by a risk averter even if the single gamble would be rejected given any initial wealth level. Samuelson has shown that such choices are impossible if the expected utility theory of preference is adopted. But they are consistent with more general theories of preference. Consequently, the intuition suggested by the law of large numbers can be correct.
ISSN: 0829-4909
Appears in Collections:Gambling Literature

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