A well-known point that goes back to Bernoulli and the very dawn of the expected utility formalism—except that conventionally this is illustrated by explaining why you should not buy lottery tickets that seem to have a positive expected return.
I’m skeptical that anyone has made this explanation, since lottery tickets never have a positive expected return. You can only mean an “explanation” for people who don’t know how to multiply.
The classic explanation of expected utility vs. expected return deals with hypothetical lottery tickets that have an positive expected return but not positive expected utility.
Okay. Sorry. What I meant was, “Since lotteries always have a negative expected return, I think that maybe the explanations you are talking about are directed at people who think that the lottery has an expected positive return because they don’t do the math.” Which you just answered. I was not familiar with this classic explanation.
I’m skeptical that anyone has made this explanation, since lottery tickets never have a positive expected return. You can only mean an “explanation” for people who don’t know how to multiply.
Would you STOP IT? For the love of Cthulhu!
The classic explanation of expected utility vs. expected return deals with hypothetical lottery tickets that have an positive expected return but not positive expected utility.
Okay. Sorry. What I meant was, “Since lotteries always have a negative expected return, I think that maybe the explanations you are talking about are directed at people who think that the lottery has an expected positive return because they don’t do the math.” Which you just answered. I was not familiar with this classic explanation.