Winning ten million dollars provides less than ten million times the utility of winning one dollar, because the richer you are, the less difference each additional dollar makes. That seems to argue against playing the lottery, though.
Very clever! You’re right; that is a situation where you might as well play the lottery.
This actually comes up in business, in terms of the types of investments that businesses make when they have a good chance of going bankrupt. They may not play the lottery, but they’re likely to make riskier moves since they have very little to lose and a lot to gain.
They may not play the lottery, but they’re likely to make riskier moves since they have very little to lose and a lot to gain.
It also applies if you believe your company will be bailed out by the government. I don’t tend to approve of bank bailouts for this reason. (Although government guarantees for deposits I place in a different category.)
Winning ten million dollars provides less than ten million times the utility of winning one dollar, because the richer you are, the less difference each additional dollar makes. That seems to argue against playing the lottery, though.
$5,000,000 debt. Bankruptcy laws.
Very clever! You’re right; that is a situation where you might as well play the lottery.
This actually comes up in business, in terms of the types of investments that businesses make when they have a good chance of going bankrupt. They may not play the lottery, but they’re likely to make riskier moves since they have very little to lose and a lot to gain.
It also applies if you believe your company will be bailed out by the government. I don’t tend to approve of bank bailouts for this reason. (Although government guarantees for deposits I place in a different category.)