Paper #570

Title:

A process approach to the utility for gambling

Author:

Marc Le Menestrel

Date:

September 2001

Abstract:

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.

Keywords:

Gambling, expected utility, process utility, rationality, irrationality, consequentialism

JEL codes:

D81

Area of Research:

Business Economics and Industrial Organization

Published in:

Theory and Decision, 50, 3, (2001), pp. 249-262

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