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Probabilistic risk aversion with an arbitrary outcome set

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  • Blavatskyy, Pavlo R.
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    Abstract

    This paper analyzes risk aversion when outcomes/consequences may not be measurable in monetary terms and people have fuzzy preferences over lotteries, i.e. they choose in a probabilistic manner. The paper shows that comparative risk aversion is well defined in a constant error/tremble model but not in a strong utility model.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176511000978
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 112 (2011)
    Issue (Month): 1 (July)
    Pages: 34-37

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    Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:34-37

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Risk aversion More risk averse than Probabilistic choice Strong utility model Fechner model Luce choice model;

    References

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    1. Pavlo Blavatskyy, 2007. "Stochastic expected utility theory," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 259-286, June.
    2. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
    3. Blavatskyy, Pavlo R., 2008. "Stochastic utility theorem," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1049-1056, December.
    4. Camerer, Colin F, 1989. " An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
    5. Loomes, Graham & Sugden, Robert, 1995. "Incorporating a stochastic element into decision theories," European Economic Review, Elsevier, vol. 39(3-4), pages 641-648, April.
    6. Wilcox, Nathaniel T., 2011. "'Stochastically more risk averse:' A contextual theory of stochastic discrete choice under risk," Journal of Econometrics, Elsevier, vol. 162(1), pages 89-104, May.
    7. Pavlo R. Blavatskyy, 2008. "Risk Aversion," IEW - Working Papers 370, Institute for Empirical Research in Economics - University of Zurich.
    8. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
    9. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
    10. Yaari, Menahem E., 1969. "Some remarks on measures of risk aversion and on their uses," Journal of Economic Theory, Elsevier, vol. 1(3), pages 315-329, October.
    11. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-89, November.
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    Cited by:
    1. Elmaghraby, Wedad J. & Larson, Nathan, 2012. "Explaining deviations from equilibrium in auctions with avoidable fixed costs," Games and Economic Behavior, Elsevier, vol. 76(1), pages 131-159.
    2. Pavlo Blavatskyy, 2014. "Stronger utility," Theory and Decision, Springer, vol. 76(2), pages 265-286, February.

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