Why do you bet less on a coin flip after winning big?
Information asymmetry
Why do you bet less on a coin flip after winning big?
Imagine you've just won a big lottery prize; naturally, you might feel more confident about your luck and less cautious in future bets.
Winning a large amount of money can make someone less careful, believing their luck is good. This is called moral hazard; it's when people take more risks because they're protected (like with insurance).
Example
If you usually bet 10 on a coin flip but now bet 50 because you won $100, that's moral hazard.
Remember this
Moral hazard can lead to riskier behavior because people feel protected, often resulting in inefficient outcomes.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
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Educational content, not financial advice.
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