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Probabilistic risk aversion with an arbitrary outcome set

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  • Blavatskyy, Pavlo R.
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    Abstract

    This paper analyzes risk aversion when outcomes/consequences may not be measurable in monetary terms and people have fuzzy preferences over lotteries, i.e. they choose in a probabilistic manner. The paper shows that comparative risk aversion is well defined in a constant error/tremble model but not in a strong utility model.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176511000978
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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 112 (2011)
    Issue (Month): 1 (July)
    Pages: 34-37

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    Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:34-37
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

    Keywords: Risk aversion More risk averse than Probabilistic choice Strong utility model Fechner model Luce choice model;

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    1. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-89, November.
    2. Mark J Machina, 1982. ""Expected Utility" Analysis without the Independence Axiom," Levine's Working Paper Archive 7650, David K. Levine.
    3. Yaari, Menahem E., 1969. "Some remarks on measures of risk aversion and on their uses," Journal of Economic Theory, Elsevier, vol. 1(3), pages 315-329, October.
    4. Wilcox, Nathaniel, 2007. "Stochastically more risk averse: A contextual theory of stochastic discrete choice under risk," MPRA Paper 11851, University Library of Munich, Germany.
    5. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
    6. Pavlo R. Blavatskyy, 2008. "Risk Aversion," IEW - Working Papers 370, Institute for Empirical Research in Economics - University of Zurich.
    7. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
    8. Pavlo Blavatskyy, 2007. "Stochastic expected utility theory," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 259-286, June.
    9. Camerer, Colin F, 1989. "An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
    10. Loomes, Graham & Sugden, Robert, 1995. "Incorporating a stochastic element into decision theories," European Economic Review, Elsevier, vol. 39(3-4), pages 641-648, April.
    11. Blavatskyy, Pavlo R., 2008. "Stochastic utility theorem," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1049-1056, December.
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    Cited by:

    1. Jose Apesteguia & Miguel Angel Ballester, 2014. "Discrete Choice Estimation of Risk Aversion," Working Papers 788, Barcelona Graduate School of Economics.
    2. Elmaghraby, Wedad J. & Larson, Nathan, 2012. "Explaining deviations from equilibrium in auctions with avoidable fixed costs," Games and Economic Behavior, Elsevier, vol. 76(1), pages 131-159.
    3. Pavlo Blavatskyy, 2014. "Stronger utility," Theory and Decision, Springer, vol. 76(2), pages 265-286, February.

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