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Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories

  • Zvi Safra

    (Tel Aviv University)

  • Uzi Segal

    ()

    (Boston College)

Rabin proved that a low level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. Rabin's arguments strongly depend on expected utility theory, but we show that similar arguments apply to almost all non-expected utility theories and even to theories dealing with uncertainty. The set of restrictions needed in order to avoid such absurd behavior may suggest that the assumption of universality of preferences over final wealth is too strong.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 633.

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Length: 39 pages
Date of creation: 05 Dec 2005
Date of revision:
Handle: RePEc:boc:bocoec:633
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