Risk-averse persons sometimes prefer to play some gambles even if they know that those gambles are not fair, i. e., on average people lose by playing them. One plausible explanation for this seemingly paradoxical phenomenon is that:

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Risk-averse persons sometimes prefer to play some gambles even if they know that those gambles are not fair, i. e., on average people lose by playing them. One plausible explanation for this seemingly paradoxical phenomenon is that:

A. The economic theory of uncertainty is not correct

B. Gambling has entertaining effects which are not treated explicitly as part of the payoffs

C. People's actions are not reasonable

D. None of the statements associated with this question are correct

Answer:

The explanation is:

B. Gambling has entertaining effects which are not treated explicitly as part of the payoffs

Explanation:

As we know, the act of gambling stimulates our brains, increasing the production of dopamine. Therefore, people do not only gamble for the payoffs, but also for the excitement and pleasure of doing it. That can explain why people who are risk-averse gamble even though they know such games are not fair. The fun and excitement may be seen in the possibility of beating the odds, in the expectation that builds while waiting for the result. It is, thus, entertaining to gamble, even if it means losing some money.