The Survivorship Bias (sometimes styled Survivor Bias) is the human tendency to value the seen or available at the expense […]

The Baader-Meinhof Phenomenon is the phenomenon where something you recently learned suddenly appears 'everywhere'. Also called Frequency Bias (or Illusion), […]

The Ostrich Effect refers to the human tendency to avoid negative information as it relates to personal finances.  Although ostriches […]

Humans have an evolutionary incentive to recognize patterns. The same mechanisms that helped early humans avoid snakes and other predators […]

You may have partied like it was 1999, but the big celebration was in 2000. Your shopping cart is consistently […]

Anchoring or the Anchoring Bias is the human tendency to evaluate or "anchor" numbers based on their presentation.  Observers and […]

Imposter Syndrome - or the Imposter Phenomenon - is a feeling of intellectual self-doubt where people fear exposure as a […]

The Dunning-Kruger effect refers to the phenomena where people of low ability have a higher self-perception of their abilities than […]

Why would a rational person purchase insurance yet also play the lottery?

It's a question that has puzzled Economists (and fake Economists, like 2/3 of the staff at DQYDJ) for a long time. Think about it, a lottery is the exact opposite of insurance. When it comes to insurance, a person purchases coverage to hedge against risks. In a lottery, sums are spent for a long-shot chance at the 'risk' of a payoff. People are risk-seeking when it comes to playing the lottery yet risk-averse when it comes to purchasing insurance. What gives?