Dynamic Decision Making when Risk Perception Depends on Past Experience
Abstract
The aim of the paper is to propose a preferences representation model under risk where risk perception can be past experience dependent. A first step consists in considering a one period decision problem where individual preferences are no more defined only on decisions but on pairs (decision, past experience). The obtained criterion is used in the construction of a dynamic choice model under risk. The paper ends with an illustrative example concerning insurance demand. Itappears that our model allows to explain modifications in the insurance demand behavior over time observed on the insurance markets for catastrophic risk and difficult to justify with standard models.(This abstract was borrowed from another version of this item.)
Download Info
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic Info
Article provided by Springer in its journal Theory and Decision.
Volume (Year): 64 (2008)
Issue (Month): 2 (March)
Pages: 173-192
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100341
Related research
Keywords: dynamic decision making; past experience; rank dependent utility model; recursive model; risk perception;Other versions of this item:
- Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008. "Dynamic Decision Making when Risk Perception Depends on Past Experience," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00211942, HAL.
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Hirshleifer & Tyler Shumway, 2003.
"Good Day Sunshine: Stock Returns and the Weather,"
Journal of Finance,
American Finance Association, vol. 58(3), pages 1009-1032, 06.
- David Hirshleifer & TYLER G. SHUMWAY, 2004. "Good Day Sunshine: Stock Returns and the Weather," Finance 0412004, EconWPA.
- Larry G. Epstein & Martin Schneider, 2001.
"Recursive Multiple-Priors,"
RCER Working Papers
485, University of Rochester - Center for Economic Research (RCER).
- Epstein, Larry G. & Schneider, Martin, 2003. "Recursive multiple-priors," Journal of Economic Theory, Elsevier, vol. 113(1), pages 1-31, November.
- Chateauneuf, Alain, 1999. "Comonotonicity axioms and rank-dependent expected utility theory for arbitrary consequences," Journal of Mathematical Economics, Elsevier, vol. 32(1), pages 21-45, August.
- Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
- Klibanoff, Peter & Marinacci, Massimo & Mukerji, Sujoy, 2009.
"Recursive smooth ambiguity preferences,"
Journal of Economic Theory,
Elsevier, vol. 144(3), pages 930-976, May.
- Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2006. "Recursive Smooth Ambiguity Preferences," Carlo Alberto Notebooks 17, Collegio Carlo Alberto, revised 2008.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
- Philip Ganderton & David Brookshire & Michael McKee & Steve Stewart & Hale Thurston, 2000. "Buying Insurance for Disaster-Type Risks: Experimental Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 271-289, May.
- Browne, Mark J & Hoyt, Robert E, 2000. " The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
- Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March.
- McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. " Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
- Caplin, Andrew & Leahy, John, 1997.
"Psychological Expected Utility Theory and Anticipatory Feelings,"
Working Papers
97-37, C.V. Starr Center for Applied Economics, New York University.
- Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory And Anticipatory Feelings," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 55-79, February.
- Kreps, David M & Porteus, Evan L, 1978.
"Temporal Resolution of Uncertainty and Dynamic Choice Theory,"
Econometrica,
Econometric Society, vol. 46(1), pages 185-200, January.
- David M Kreps & Evan L Porteus, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Levine's Working Paper Archive 625018000000000009, David K. Levine.
- Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
- Quiggin, John, 1991. " Comparative Statics for Rank-Dependent Expected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 339-50, December.
- Ganderton, Philip T, et al, 2000. " Buying Insurance for Disaster-Type Risks: Experimental Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 271-89, May.
- Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Langlais, Eric, 2009.
"les criminels aiment-ils le risque ?
[Are criminals risk-seeking individulas ?]," MPRA Paper 14892, University Library of Munich, Germany.
- Éric Langlais, 2010. "Les criminels aiment-ils le risque ?," Revue économique, Presses de Sciences-Po, vol. 0(2), pages 263-280.
Lists
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.Statistics
Access and download statisticsCorrections
When requesting a correction, please mention this item's handle: RePEc:kap:theord:v:64:y:2008:i:2:p:173-192For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.

