A mathematically fair bet is one in which a gambler bets, say, $100 for a 10 percent

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A mathematically “fair bet” is one in which a gambler bets, say, $100 for a 10 percent chance to win $1000 ($100 = .10 x $1000). Assuming diminishing marginal utility of dollars, explain why this is not a fair bet in terms of utility. Why is it even a less fair bet when the “house” takes a cut of each dollar bet? So is gambling irrational?

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Economics

ISBN: 978-0073375694

18th edition

Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

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