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Weber's Law and the Biological Evolution of Risk Preferences: The Selective Dominance of the Logarithmic Utility Function

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Author Info
Hans-Werner Sinn ()

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Abstract

The paper offers a proof that expected utility maximisation with logarithmic utility is a dominant preference in the biological selection process in the sense that a population following any other preference for decision-making under risk will, with a probability that approaches certainty, disappear relative to the population following this preference as time goes to infinity. The result is contrasted with Weber's and Fechner's Psychophysical Law which implies logarithmic sensation functions for objective physical stimuli.

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File URL: http://www.cesifo-group.de/DocCIDL/cesifo_wp770.pdf
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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 770.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_770

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Related research
Keywords: evolution; selection; risk preferences;

References listed on IDEAS
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  1. Karni, Edi & Schmeidler, David, 1986. "Self-preservation as a foundation of rational behavior under risk," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 71-81, March. [Downloadable!] (restricted)
  2. Robson, Arthur J., 1996. "A Biological Basis for Expected and Non-expected Utility," Journal of Economic Theory, Elsevier, vol. 68(2), pages 397-424, February. [Downloadable!] (restricted)
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This page was last updated on 2009-12-14.

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