© 2019 Royal Economic Society. Published by Oxford University Press. We study a model that integrates productive and socialising efforts with occupational choice, and endogenous spillovers. We show that more talented individuals work harder and contribute more to externalities, but also have incentives to segregate. Average socialising increases the productivity of the occupation. The size of an occupation grows with its synergies. Individuals underinvest in productive and socialising effort, and sort themselves inefficiently into occupations. We derive the optimal subsidy for sorting into different occupations. Finally, we derive a rule to identify overpopulated sectors and establish the connection between inequality of talents, socialising, productive efforts and occupation size.

Risk‐neutral sellers can extract high profits from risk‐loving buyers using lotteries. To limit risk‐taking, gambling is heavily regulated in most countries. In this article, I show that protecting risk‐loving buyers is essentially impossible. Even if sellers are restricted from using mechanisms that resemble lotteries, they can still construct selling mechanisms that ensure unbounded profits as long as buyers are risk‐loving, at least asymptotically. Asymptotically risk‐loving preferences are both sufficient and necessary for unbounded profits. Buyers are asymptotically risk‐loving, for example, when they are globally risk‐loving, when they have cumulative prospect theory preferences, or when their utility is bounded from below.