Weber's Law and the Biological Evolution of Risk Preferences: The Selective Dominance of the Logarithmic Utility Function, 2002 Geneva Risk Lecture
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. The Geneva Papers on Risk and Insurance Theory (2003) 28, 87–100. doi:10.1023/A:1026384519480
Volume (Year): 28 (2003)
Issue (Month): 2 (December)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
|Order Information:|| Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK|
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:
Please 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.:
- Sinn, Hans-Werner, 1985.
"Psychophysical laws in risk theory,"
Munich Reprints in Economics
19903, University of Munich, Department of Economics.
- Mark Rubinstein., 1991. "Continuously Rebalanced Investment Strategies," Research Program in Finance Working Papers RPF-205, University of California at Berkeley.
- 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.
- 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.
- Henry Allen Latane, 1959. "Criteria for Choice Among Risky Ventures," Journal of Political Economy, University of Chicago Press, vol. 67, pages 144.
- John Kagel & Leonard Green & Raymond Battalio, 1995. "Economic choice theory. an experimental analysis of animal behavior," Framed Field Experiments 00166, The Field Experiments Website.
When requesting a correction, please mention this item's handle: RePEc:pal:genrir:v:28:y:2003:i:2:p:87-100. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniel Foley)
If references are entirely missing, you can add them using this form.