How rational is gambling?

Abstract

The typical gambler loses money but continues to gamble nonetheless. Why? Research from orthodox and behavioral economics, psychology, sociology, and medicine has offered a wide range of possible explanations. This paper reviews these explanations. The evidence is organized according to the degree of rationality assumed and/or found in the studies. This approach allows research from highly distinctive fields to be integrated within a unified framework. Gambling patterns are so highly dispersed that no satisfying one‐fits‐all explanation is possible. The findings suggest that the whole spectrum from rationality to highly destructive irrationality can be found within the gambler population.

A computational framework for distinguishing motivated reasoning and practical rationality

“…They could act in ways which are incompatible with the utilities themselves (like when we plan to exercise but fail to) or fail to update their utilities given new information (Edwards, 1954;Kalis, Mojzisch, Schweizer, & Kaiser, 2008;Stetzka & Winter, 2021;Wiggins, 1978). All of these possibilities can be accounted for under our framework, distinguishing it from revisionist accounts of theoretical rationality (like the idea of "resource rationality" proposed by Lieder & Griffiths, 2020).…”

Risk aversion and favourite–longshot bias in a competitive fixed‐odds betting market

“…But some people do bet. This may be fuelled partly by the utility they get from placing a bet, perhaps in a way that increases their enjoyment of watching sporting events, as discussed in detail by Stezka and Winter (2023). But even then, there is the question of why they choose to bet on one team rather than the other.…”

A Bayesian decision-theoretic framework for studying motivated reasoning

“…First, we'd expect that people might have utilities that they don't correctly join with information they believe, or utility functions which deviate from rational-actor models (Loewenstein & Molnar, 2018;Tversky & Kahneman, 1991). Second, people could fail to act in ways which are compatible with the utilities themselves (like when we plan to exercise but fail to), or fail to update their utilities when they are provided with new information (Edwards, 1954;Kalis, Mojzisch, Schweizer, & Kaiser, 2008;Stetzka & Winter, 2021;Wiggins, 1978). All of these possibilities distinguish the Bayesian decision framework from revisionist accounts of theoretical rationality, like the idea of resource rationality proposed by Lieder and colleagues (2020).…”

“…Instead, it is the product of perception of the environment at a particular time and context. And it is known that the perceived utility of some actions change as other states of the world change (e.g., see Holton, 1999;Meyer & Hundtofte, 2022;Portmore, 2013;Stetzka & Winter, 2021). One question then is whether an initially practically rational decision could lead to a stable credence at odds with the evidence.…”