Recursive non-expected utility: Connecting ambiguity attitudes to risk preferences and the level of ambiguity

2019 ◽  
Vol 114 ◽  
pp. 285-307 ◽  
Author(s):  
Özgür Evren
Keyword(s):  
Expected Utility ◽  
Risk Preferences ◽  
Ambiguity Attitudes

scholarly journals Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses

2015 ◽  
Vol 7 (2) ◽  
pp. 77-100 ◽  
Author(s):  
Aurélien Baillon ◽  
Han Bleichrodt
Keyword(s):  
Expected Utility ◽  
Ambiguity Aversion ◽  
Choquet Expected Utility ◽  
Maxmin Expected Utility ◽  
Stock Indices ◽  
Descriptive Validity ◽  
Utility Models ◽  
Ambiguity Attitudes ◽  
Gains And Losses ◽  
Fourfold Pattern

This paper reports on two experiments that test the descriptive validity of ambiguity models using a natural source of uncertainty (the evolution of stock indices) and both gains and losses. We observed violations of probabilistic sophistication, violations that imply a fourfold pattern of ambiguity attitudes: ambiguity aversion for likely gains and unlikely losses and ambiguity seeking for unlikely gains and likely losses. Our data are most consistent with prospect theory and, to a lesser extent, α-maxmin expected utility and Choquet expected utility. Models with uniform ambiguity attitudes are inconsistent with most of the observed behavioral patterns. (JEL D81, D83, G11, G12, G14)

scholarly journals Efficiency, equity, and social rationality under uncertainty

2021 ◽  
Author(s):  
Kaname Miyagishima
Keyword(s):  
Simple Model ◽  
Social Welfare ◽  
Expected Utility ◽  
Risk Preferences ◽  
Utility Functions ◽  
Subjective Expected Utility ◽  
Risk Averse ◽  
Social Rationality ◽  
Certainty Equivalents ◽  
Ex Post

AbstractIn a simple model where agents’ monetary payoffs are uncertain, this paper examines the aggregation of subjective expected utility functions which are interpersonally noncomparable. A maximin social welfare criterion is derived from axioms of efficiency, ex post equity, and social rationality, combined with the independence of beliefs and risk preferences in riskless situations (Chambers and Echenique in Games Econ Behav 76:582–595, 2012). The criterion compares allocations by the values of the prospects composed of the statewise minimum payoffs evaluated by the certainty equivalents. Because of this construction, the criterion is egalitarian and risk averse.

Contractualism and risk preferences

2020 ◽  
pp. 1-24
Author(s):  
Tobey K. Scharding
Keyword(s):  
Expected Utility ◽  
Risk Preferences ◽  
Risk Preference ◽  
Individual Risk ◽  
Average Risk ◽  
Ex Ante ◽  
Risk Thresholds

Abstract I evaluate two contractualist approaches to the ethics of risk: mutual constraint and the probabilistic, ex ante approach. After explaining how these approaches address problems in earlier interpretations of contractualism, I object that they fail to respond to diverse risk preferences in populations. Some people could reasonably reject the risk thresholds associated with these approaches. A strategy for addressing this objection is considering individual risk preferences, similar to those Buchak discusses concerning expected-utility approaches to risk. I defend the risk-preferences-adjusted (RISPREAD) contractualist approach, which calculates a population’s average risk preference and permits risk thresholds below that preference, only.

Software Project Managers’ Risk Preferences

1996 ◽  
Vol 11 (4) ◽  
pp. 287-295
Author(s):  
Thomas W. Lauer
Keyword(s):  
Software Development ◽  
Prospect Theory ◽  
Expected Utility ◽  
Utility Theory ◽  
Risk Preferences ◽  
Expected Utility Theory ◽  
Project Managers ◽  
Development Projects ◽  
Software Project ◽  
Potential Importance

A questionnaire was administered to 68 software project managers (SPMs). Questions were designed to test whether SPMs’ risky judgments were more consistent with Expected Utility Theory or Prospect Theory. Although the results were more consistent with Prospect Theory, they differed in important ways showing SPMs’ judgments to be less homogeneous than is assumed by either theory. These results highlight the potential importance of SPMs’ judgments to the outcome of software development projects.

scholarly journals Are Risk Preferences Stable across Contexts? Evidence from Insurance Data

2011 ◽  
Vol 101 (2) ◽  
pp. 591-631 ◽  
Author(s):  
Levon Barseghyan ◽  
Jeffrey Prince ◽  
Joshua C Teitelbaum
Keyword(s):  
Risk Aversion ◽  
Expected Utility ◽  
Structural Model ◽  
Risk Preferences ◽  
Poisson Processes ◽  
Insurance Data ◽  
Unique Dataset

Using a unique dataset, we test whether households' deductible choices in auto and home insurance reflect stable risk preferences. Our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household-coverage specific Poisson processes. We find that the hypothesis of stable risk preferences is rejected by the data. Our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices. Our results are robust to several alternative modeling assumptions. (JEL D11, D83)

scholarly journals Violence and Risk Preference: Experimental Evidence from Afghanistan

2014 ◽  
Vol 104 (1) ◽  
pp. 123-148 ◽  
Author(s):  
Michael Callen ◽  
Mohammad Isaqzadeh ◽  
James D. Long ◽  
Charles Sprenger
Keyword(s):  
Experimental Evidence ◽  
Expected Utility ◽  
Risk Taking ◽  
Risk Preferences ◽  
Risk Preference ◽  
Economic Risk ◽  
Experimental Procedure ◽  
Specific Preference ◽  
The Relationship

We investigate the relationship between violence and economic risk preferences in Afghanistan combining: (i) a two-part experimental procedure identifying risk preferences, violations of Expected Utility, and specific preferences for certainty; (ii) controlled recollection of fear based on established methods from psychology; and (iii) administrative violence data from precisely geocoded military records. We document a specific preference for certainty in violation of Expected Utility. The preference for certainty, which we term a Certainty Premium, is exacerbated by the combination of violent exposure and controlled fearful recollections. The results have implications for risk taking and are potentially actionable for policymakers and marketers. (JEL A12, C91, D12, D74, D81, O12, O17)

scholarly journals A Behavioral Analysis of Stochastic Reference Dependence

2016 ◽  
Vol 106 (9) ◽  
pp. 2760-2782 ◽  
Author(s):  
Yusufcan Masatlioglu ◽  
Collin Raymond
Keyword(s):  
Risk Aversion ◽  
Expected Utility ◽  
Risk Preferences ◽  
Behavioral Analysis ◽  
Reference Dependence ◽  
Quadratic Utility ◽  
Rank Dependent Utility ◽  
Trivial Intersection ◽  
Gain Loss ◽  
New Applications

We examine the reference-dependent risk preferences of Kőszegi and Rabin (2007), focusing on their choice-acclimating personal equilibria. Although their model has only a trivial intersection (expected utility) with other reference-dependent models, it has very strong connections with models that rely on different psychological intuitions. We prove that the intersection of rank-dependent utility and quadratic utility, two well-known generalizations of expected utility, is exactly monotone linear gain-loss choice-acclimating personal equilibria. We use these relationships to identify parameters of the model, discuss loss and risk aversion, and demonstrate new applications. (JEL D11, D81)

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