Question by Tara Boza: Why is it even a less fair bet when the “house” takes a cut of each dollar bet? So is gambling irrational?
A mathematically “fair bet” is one in which a gambler bets, say, 0 for a 10 percent chance to win 00 (0=.10×00). 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?
Answer by Jeff Muscato
It may be irrational in a purely financial sense, but consider the value of the entertainment. If it costs 0 for a 10% chance of 0, you might throw the difference in with the bill for the drinks: fun.
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