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Relaxing The Expected Utility Hypothesis And Entry/Exit Decisions Of The Risk-Averse Firm

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  • Finkelshtain, Israel
  • Hewitt, Julie

Abstract

A risk-aversion theory is formulated directly from a preference relation, rather than with a utility function representation. An example concerning insurance demand provides intuitive support. This theory is applied to analyze firms' entry/exit decisions, the long run equilibrium of an industry and comparisons between firms with different risk attitudes .

Suggested Citation

  • Finkelshtain, Israel & Hewitt, Julie, 1990. "Relaxing The Expected Utility Hypothesis And Entry/Exit Decisions Of The Risk-Averse Firm," 1990 Annual meeting, August 5-8, Vancouver, Canada 271061, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea90:271061
    DOI: 10.22004/ag.econ.271061
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    References listed on IDEAS

    as
    1. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
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    3. Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 69(4), pages 623-638, September.
    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. Conlisk, John, 1989. "Three Variants on the Allais Example," American Economic Review, American Economic Association, vol. 79(3), pages 392-407, June.
    6. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
    7. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
    8. Weiss, Michael D., 1987. "Conceptual Foundations of Risk Theory," Technical Bulletins 257198, United States Department of Agriculture, Economic Research Service.
    9. Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-529, June.
    10. 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.
    11. Safra, Zvi & Zilcha, Itzhak, 1986. "Firm's hedging behavior without the expected utility hypothesis," Economics Letters, Elsevier, vol. 21(2), pages 145-148.
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