Schmidt, Ulrich: A Theory of the Gambling Effect
World Conference Econometric Society, 2000, Seattle

Enrico Diecidue, Tilburg University
Ulrich Schmidt, Christian-Albrechts-Universitaet zu Kiel
Peter P. Wakker, Tilburg University
A Theory of the Gambling Effect
Session: C-11-24  Tuesday 15 August 2000  by Schmidt, Ulrich
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 ist primary applications will be descriptive. It sheds new light on empirical observations of risk attitides and provides new insights into the distinction between risky and riskless utility.


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