Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-28T04:49:45.723Z Has data issue: false hasContentIssue false
  • English
  • Français

A NOTE ON THE JOINT OCCURRENCE OF INSURANCE AND GAMBLING

Published online by Cambridge University Press:  16 November 2007

LARRY E. JONES
LARRY E. JONES
Affiliation:
University of Minnesota and Federal Reserve Bank of Minneapolis
Get access Rights & Permissions [Opens in a new window]

Abstract

This note provides a formal justification for the Friedman and Savage nonconcavity in the utility of money. This is based on the possibility of indivisibilities in the consumption possibilities set. A precise characterization of when gambling is optimal (and the optimal type) is provided in one special case. Some possible limitations are considered.

Keywords

IndivisibilitiesInsuranceGamblingLabor Supply
Type
VINTAGE ARTICLE
Information
Macroeconomic Dynamics , Volume 12 , Issue 1 , February 2008 , pp. 97 - 111
Copyright
© 2007 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Friedman M. and L. Savage 1948 The utility analysis of choices involving risk. Journal of Political Economy 56, 279– 304.Google Scholar
Grandmont J.M. 1972 Continuity properties of a von Neumann-Morgenstern utility. Journal of Economic Theory 4, 45– 57.Google Scholar
Hansen G. 1985 Indivisible labor and the business cycle. Journal of Monetary Economics 16, 309– 327.Google Scholar
Kwang N. Y. 1965 Why do people buy lottery tickets? Choices involving risk and the indivisibility of expenditure. Journal of Political Economy 73, 530– 535.Google Scholar
Ljungqvist L. and T. J. Sargent (Forthcoming) Do taxes explain European employment? Indivisible labor, human capital, lotteries and savings. In D. Acemoglu and M. Woodford (eds.), NBER 2006 Macroeconomics Annual. Cambridge: NBER.
Mas-Colell A. 1975 A model of equilibrium with differential commodities. Journal of Mathematical Economics 2, 263– 295.Google Scholar
Mulligan C. B. 2001 Aggregate implications of indivisible labor. Advances in Macroeconomics 1, 1.Google Scholar
Prescott E. and R. Townsend 1984 Pareto optima and competitive equilibria with adverse selection and moral hazard. Econometrica 52, 21– 46.Google Scholar
Prescott E. and J.V. Rios-Rull 1992 Classical competitive analysis of economies with islands. Journal of Economic Theory 57, 73– 98.Google Scholar
Prescott E. 2004 Why do Americans work so much more than Europeans? Quarterly Review of the Federal Reserve Bank of Minneapolis 28, 2– 13.Google Scholar
Prescott E. (Forthcoming) Comment on Ljungqvist L. and T.J. Sargent: Do taxes explain European employment? Indivisible labor, human capital, lotteries and savings. In D. Acemoglu and M. Woodford (eds.), NBER 2006 Macroeconomics Annual. Cambridge: NBER.
Rogerson R. 1988 Indivisible labor, lotteries and equilibrium. Journal of Monetary Economics 21, 3– 13.Google Scholar
Rosen S. 1974 Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy 82, 34– 55.Google Scholar