Uitlity theory and participation in unfair lotteries

Abstract

This paper provides an alternative explanation for the observed behaviour of individuals, that is consistent with consumer choice theory. The basic hypothesis is that there are certain commodities, mainly luxuries, which are available only in integer amounts. Further the price of even a single unit of these commoties is large in relation to an individual's budget constraint, with the result that consumption of these commodities implies sacrifice of consumption of other more basic commodities.