Risk: The long and the short.

Abstract : This paper was stimulated by a recent article of Lola Lopes (1982) 'Decision making in the short run', that challenges the normative adequacy of expected utility theory. This note addresses some of the issues raised by Lopes and rebuts her main arguments. The authors propose a new normative treatment and a psychological analysis of an interesting gambling problem introduced by Paul Samuelson (1963) in his article 'Risk and uncertainty: A fallacy of large numbers.'