A NOTE ON THE JOINT OCCURRENCE OF INSURANCE AND GAMBLING

Larry Jones

Macroeconomic Dynamics, 2008, vol. 12, issue 1, 97-111

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.

Date: 2008
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