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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
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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

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