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A Note on the Risk Behavior and Death of Homo Economicus

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  • Johansson-Stenman, Olof

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Recent papers by Cox and Sadiraj (2006) and Rubinstein (2006) have pointed out that expected utility theory is more general than has sometimes been acknowledged, and can hence not be refuted as easily by means of experiments. While acknowledging this fact, this note nevertheless demonstrates that typical risk experimental results are impossible to reconcile with conventional dynamic consumption theory under risk, where people are time consistent and integrate all sources of income perfectly.

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File URL: http://hdl.handle.net/2077/2693
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 221.

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Length: 11 pages
Date of creation: 01 Aug 2006
Date of revision:
Handle: RePEc:hhs:gunwpe:0221

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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: The Rabin critique; expected utility of income; expected utility of final wealth; dynamic consumption theory; risk experiments; imperfect income integration; prospect theory;

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References

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  1. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, December.
  2. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, Econometric Society, vol. 68(5), pages 1281-1292, September.
  3. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  4. Cox, James C. & Sadiraj, Vjollca, 2006. "Small- and large-stakes risk aversion: Implications of concavity calibration for decision theory," Games and Economic Behavior, Elsevier, Elsevier, vol. 56(1), pages 45-60, July.
  5. Heinemann, Frank, 2005. "Measuring Risk Aversion and the Wealth Effect," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 156, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Ariel Rubinstein, 2004. "Dilemmas of an Economic Theorist," Econometric Society 2004 North American Summer Meetings 661, Econometric Society.
  7. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(6), pages 971-87, December.
  8. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1644-1655, December.
  9. Matthew Rabin & Richard H. Thaler, 2001. "Anomalies: Risk Aversion," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(1), pages 219-232, Winter.
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