IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/81364.html
   My bibliography  Save this paper

What is risk aversion?

Author

Listed:
  • Stefansson, H. Orii
  • Bradley, Richard

Abstract

According to the orthodox treatment of risk preferences in decision theory, they are to be explained in terms of the agent's desires about concrete outcomes. The orthodoxy has been criticized both for conflating two types of attitudes and for committing agents to attitudes that do not seem rationally required. To avoid these problems, it has been suggested that an agent's attitudes to risk should be captured by a risk function that is independent of her utility and probability functions. The main problem with that approach is that it suggests that attitudes to risk are wholly distinct from people's (non-instrumental) desires. To overcome this problem, we develop a framework where an agent's utility function is defined over chance propositions (that is, propositions describing objective probability distributions) as well as ordinary (non-chance) ones, and argue that one should explain different risk attitudes in terms of different forms of the utility function over such propositions.

Suggested Citation

  • Stefansson, H. Orii & Bradley, Richard, 2019. "What is risk aversion?," LSE Research Online Documents on Economics 81364, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:81364
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/81364/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Björn Lundgren & H. Orri Stefánsson, 2020. "Against the De Minimis Principle," Risk Analysis, John Wiley & Sons, vol. 40(5), pages 908-914, May.

    More about this item

    JEL classification:

    • N0 - Economic History - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:81364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.