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26 May, 05:59

A "mathematically fair bet" is one in which a gambler bets, say, $100 for a 10 percent chance to win $1,000 ($100 = 0.10 * $1,000). Assuming diminishing marginal utility of dollars, this is not a fair bet in terms of utility because

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  1. 26 May, 06:52
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    Answer: the winnings are reduced

    Step-by-step explanation:

    Given 10 percent chance to win $1,000 for $100. That is

    Gain = $900

    Assuming diminishing marginal utility of dollars, when the utility of the gain and the money used for bet are considered, it is discovered that the utility of the $100 used to make the bet is greater than the $900 that you might gain if you win the bet.

    this is not a fair bet in terms of utility because the winnings are reduced.
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