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
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Volume (Year): 28 (2003)
Issue (Month): 2 (December)
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References listed on IDEAS
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.:
- Raymond Battalio & Leonard Green & John Kagel, 1995. "Economic choice theory. an experimental analysis of animal behavior," Framed Field Experiments 00166, The Field Experiments Website.
- 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.
- Sinn, Hans-Werner, 1980. "Ökonomische Entscheidungen bei Ungewißheit," Monograph, Mohr Siebeck, Tübingen, edition 1, number urn:isbn:9783169427024.
- Sinn, Hans-Werner, 1985.
"Psychophysical laws in risk theory,"
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Elsevier, vol. 6(2), pages 185-206, June.
- Henry Allen Latane, 1959. "Criteria for Choice Among Risky Ventures," Journal of Political Economy, University of Chicago Press, vol. 67, pages 144-144.
- 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.
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