The rationality of accepting compounds of unattractive gambles

Date
1987-01
Journal Title
Journal ISSN
Volume Title
Publisher
University of Toronto
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.
Description
Keywords
gamble, risk, theory of preference, law of large numbers
Citation