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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 97-111 |
| Number of pages | 15 |
| Journal | Macroeconomic Dynamics |
| Volume | 12 |
| Issue number | 1 |
| DOIs | |
| State | Published - Feb 1 2008 |
Bibliographical note
Publisher Copyright:© 2007 Cambridge University Press.
Keywords
- Gambling
- Indivisibilities
- Insurance
- Labor supply