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What Do We Know About Decision Making Under Risk And Where Do We Go From Here?

  • Buschena, David E.
  • Zilberman, David

This article reviews two major approached used in the past for risk analysis—the expected utility approach and the use of safety rules—and endeavors to reconcile their applicability and use in light of the recent nonexpected utility risk literature and working using the mean-Gini coefficient for risk analysis. This leads to the identification of several “"reduced form”" hypotheses that hold under a variety of theoretical structures and to a discussion of some empirical evidence regarding these hypotheses. The major lesson of recent research of individual behavior under risk is that it is not always consistent with the expected utility approach; in short, there is no generic model for evaluating behavior under risk.

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File URL: http://purl.umn.edu/30756
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Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 19 (1994)
Issue (Month): 02 (December)
Pages:

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Handle: RePEc:ags:jlaare:30756
Contact details of provider: Web page: http://waeaonline.org/
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  1. Grether, David M. & Plott, Charles R., . "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers 152, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Uzi Segal, 1984. "Nonlinear Decision Weights with the Independence Axiom," UCLA Economics Working Papers 353, UCLA Department of Economics.
  3. Shalit, Haim & Yitzhaki, Shlomo, 1984. " Mean-Gini, Portfolio Theory, and the Pricing of Risky Assets," Journal of Finance, American Finance Association, vol. 39(5), pages 1449-68, December.
  4. Machina, Mark J., 1989. "Comparative statics and non-expected utility preferences," Journal of Economic Theory, Elsevier, vol. 47(2), pages 393-405, April.
  5. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. " Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
  6. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
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