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  • LARRY E. JONES (a1)

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.

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Address correspondence to: Larry E. Jones, Department of Economics, University of Minnesota, 1035 Heller Hall, 271-19th Avenue South, Minneapolis, MN 55455, USA; e-mail:
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FriedmanM. and L.Savage1948The utility analysis of choices involving risk. Journal of Political Economy56, 279304.

GrandmontJ.M.1972Continuity properties of a von Neumann-Morgenstern utility. Journal of Economic Theory4, 4557.

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KwangN. Y.1965Why do people buy lottery tickets? Choices involving risk and the indivisibility of expenditure. Journal of Political Economy73, 530535.

Mas-ColellA.1975A model of equilibrium with differential commodities. Journal of Mathematical Economics2, 263295.

MulliganC. B.2001Aggregate implications of indivisible labor. Advances in Macroeconomics1, 1.

PrescottE. and R.Townsend1984Pareto optima and competitive equilibria with adverse selection and moral hazard. Econometrica52, 2146.

PrescottE. and J.V.Rios-Rull1992Classical competitive analysis of economies with islands. Journal of Economic Theory57, 7398.

RogersonR.1988Indivisible labor, lotteries and equilibrium. Journal of Monetary Economics21, 313.

RosenS.1974Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy82, 3455.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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