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A Model of Casino Gambling Nicholas Barberis Yale University February 2009

. In this paper, we show that prospect theory can o

er a rich theory of gambling, one that captures many features of actual gambling behavior. First, we demonstrate that, for a wide range of parameter values, a prospect theory agent would be willing to gamble in a casino, even if the casino only o

ers bets with zero or negative expected value. Second, we show that prospect theory predicts a plausible time inconsistency: at the moment he enters

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A Model of Casino Gambling Nicholas Barberis Yale University February 2009






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