'Stochastically more risk averse:' A contextual theory of stochastic discrete choice under risk
AbstractMicroeconometric treatments of discrete choice under risk are typically homoscedastic latent variable models. Specifically, choice probabilities are given by preference functional differences (given by expected utility, rank-dependent utility, etc.) embedded in cumulative distribution functions. This approach has a problem: Estimated utility function parameters meant to represent agents' degree of risk aversion in the sense of Pratt (1964) do not imply a suggested "stochastically more risk averse" relation within such models. A new heteroscedastic model called "contextual utility" remedies this, and estimates in one data set suggest it explains (and especially predicts) as well as or better than other stochastic models.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 162 (2011)
Issue (Month): 1 (May)
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Web page: http://www.elsevier.com/locate/jeconom
Risk More risk averse Discrete choice Stochastic choice Heteroscedasticity;
Other versions of this item:
- Wilcox, Nathaniel, 2007. "Stochastically more risk averse: A contextual theory of stochastic discrete choice under risk," MPRA Paper 11851, University Library of Munich, Germany.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
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