gambling
gamblingTaking on bets at less than actuarially fair odds. On the assumption that the gambler understands the odds, there are three possible reasons for being willing to gamble. One is that the gambler may have a non-concave utility function, with marginal utility increasing over some range of incomes. This means that even if the expected value of losses exceeds that of gains, the benefit from the gains exceeds the damage through the losses. A second reason, which may affect businesses, is that to a gambler already insolvent or near to insolvency, gambling may appear worthwhile because gains can be kept while creditors bear any losses. A third reason for gambling is that people actually enjoy excitement, and gamble for pleasure. This applies particularly to cases such as lotteries where punters incur a large chance of a small loss to obtain a small chance of a large gain.
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