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Risk Aversion With State Dependent Preferences In The Rank Dependent Expected Utility Theory
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Book Synopsis Risk Aversion with State-Dependent Preferences in the Rank-Dependent Expected Utility Theory by : W. Henry Chiu
Download or read book Risk Aversion with State-Dependent Preferences in the Rank-Dependent Expected Utility Theory written by W. Henry Chiu and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We extend the analysis of risk aversion with state-dependent preferences to the Rank-dependent Expected Utility theory. We find that in this extended theory, for two preference relations to be comparable in risk aversion, not only do their reference sets need to coincide (a condition first introduced by Karni (1983, 85) in the original Expected Utility framework), but they must also rank the prospective state-dependent outcomes in the same manner. We formalize this additional condition by introducing the concept of certainty sets. Under our condition of comparability, various results and characterizations of interpersonal comparison of risk aversion are obtained. The implications for a specific insurance problem are also discussed.
Book Synopsis Generalized Expected Utility Analysis of Risk Aversion with State Dependent Preferences by : Edi Karni
Download or read book Generalized Expected Utility Analysis of Risk Aversion with State Dependent Preferences written by Edi Karni and published by . This book was released on 1984 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Models of Risk Preferences by : Glenn W. Harrison
Download or read book Models of Risk Preferences written by Glenn W. Harrison and published by Emerald Group Publishing. This book was released on 2023-10-23 with total page 291 pages. Available in PDF, EPUB and Kindle. Book excerpt: Models of Risk Preferences collects studies that critically review alternatives to Expected Utility Theory from the perspective of experimental economics.
Book Synopsis Risk Aversion in the Theory of Expected Utility with Rank Dependent Probabilities by : Chew Soo Hong
Download or read book Risk Aversion in the Theory of Expected Utility with Rank Dependent Probabilities written by Chew Soo Hong and published by . This book was released on 1985 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Subjective Expected Utility Theory with State-dependent Preferences by : Edi Karni
Download or read book Subjective Expected Utility Theory with State-dependent Preferences written by Edi Karni and published by . This book was released on 1990 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Schur-concave Characterization of Risk Aversion for Non-expected Utility Preferences by : Soo Hong Chew
Download or read book A Schur-concave Characterization of Risk Aversion for Non-expected Utility Preferences written by Soo Hong Chew and published by . This book was released on 1994 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Expected Utility Theory for State-dependent Preferences by : Edi Karni
Download or read book An Expected Utility Theory for State-dependent Preferences written by Edi Karni and published by . This book was released on 1980 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Experiments on Decisions under Risk: The Expected Utility Hypothesis by : P.J.H. Schoemaker
Download or read book Experiments on Decisions under Risk: The Expected Utility Hypothesis written by P.J.H. Schoemaker and published by Springer Science & Business Media. This book was released on 2013-11-11 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this valuable book, Paul Schoemaker summarizes recent experimental and field research that he and others have undertaken regarding the descrip tive validity of expected utility theory as a model of choice under uncer tainty. His principal message is that this paradigm is too narrow in its con ception and misses some of the important elements of a descriptive model of individual choice. In particular, Schoemaker calls attention to the impor tance of individual differences, task effects, and context effects as they influence behavior. The expected utility hypothesis has come under scrutiny in recent years from a number of different quarters. This book brings together these many studies and relates them to the large body of literature on individual de cision making under risk. Although this paradigm may be appropriate for describing behavior under many conditions of uncertainty, Schoemaker presents convincing evidence that it does not do well with respect to protec tion against low-probability events. For example, he shows that the insur ance purchase decision is influenced by the way information is presented to the client, as well as by the statistical knowledge of the respondents.
Book Synopsis Expected Utility Theory and Inner and Outer Measures of Loss Aversion by : G. Charles-Cadogan
Download or read book Expected Utility Theory and Inner and Outer Measures of Loss Aversion written by G. Charles-Cadogan and published by . This book was released on 2018 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce a weak rank dependent utility (RDU) model, with one extra parameter compared to the canonical expected utility (EUT) model, which makes many of the same predictions as cumulative prospect theory (CPT). The model extends a set of nonconvex preferences to its maximal inner convex subset, satisfies stochastic dominance principles, resolves the Allais paradox, predicts CPT fourfold pattern of risk attitudes, and characterizes reference dependent preferences. Unlike extant RDU models that transform probability weighting functions (pwfs), our model transforms ranked choice sets while leaving objective probabilities intact. So pwfs are hidden in our model. CPT's loss aversion index is a special case of the interior solution for the extra parameter for unconstrained utility maximization, and it is driven by tail probabilities in our model. We provide several examples to show how popular formulae for the loss aversion index can be classified into inner and outer measures of loss aversion via an approximate Radon-Nikodym formulation of the model. This resolves sources of disparity in estimating the loss aversion index with experimental data. We show that under extant approaches, the loss aversion index is best estimated by a mixture of inner and outer measures of itself. Further- more, we identify a CPT paradox: The utility loss aversion index is unmeasurable under CPT nonexpected utility framework for mixed lotteries; but measurable for same under the expected utility paradigm adapted to our model.
Book Synopsis Generalized Expected Utility Theory by : John Quiggin
Download or read book Generalized Expected Utility Theory written by John Quiggin and published by Springer Science & Business Media. This book was released on 1993 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic analysis of choice under uncertainty has been dominated by the expected utility (EU) model, yet the EU model has never been without critics. Psychologists accumulated evidence that individual choices under uncertainty were inconsistent with the predictions of the EU model. Applied work in areas such as finance was dominated by the simpler mean-variance analysis. In the 1980s this skepticism was dispelled as a number of generalizations of EU were proposed, most of which were capable of explaining evidence inconsistent with EU, while preserving transitivity and dominance. Generalized expected utility is now a flourishing subfield of economics, with dozens of competing models and considerable literature exploring their theoretical properties and comparing their empirical performance. But the EU model remains the principal tool for the analysis of choice under uncertainty. There is a view that generalized models are too difficult to handle or incapable of generating sharp results. This creates a need to show that the new models can be used in the kinds of economic analysis for which EU has been used, and that they can yield new and interesting results. This book meets this need by describing one of the most popular generalized models -- the rank-dependent expected utility model (RDEU), also known as anticipated utility, EU with rank-dependent preferences, the dual theory of choice under uncertainty, and simply as rank-dependent utility. As the many names indicate, the model has been approached in many ways by many scientists and for this reason, consideration of a single model sheds light on many of the concerns that have motivated the development of generalized utility models. The popularity of the RDEU model rests on its simplicity and tractability. The standard tools of analysis developed for EU theory may be applied to the RDEU model, but since RDEU admits behavior inconsistent with EU, the field of potential applications is widened. As such, the RDEU model is not as much a competitor to EU as an extension based on less restrictive assumptions.
Book Synopsis A More General Measure of Risk Aversion when Utility is State-dependent by : David Kelsey
Download or read book A More General Measure of Risk Aversion when Utility is State-dependent written by David Kelsey and published by . This book was released on 1989 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Risk and Risk Aversion for State-dependent Utility by : D. Kelsey
Download or read book Risk and Risk Aversion for State-dependent Utility written by D. Kelsey and published by . This book was released on 1991 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Beliefs, Interactions and Preferences by : Mark J. Machina
Download or read book Beliefs, Interactions and Preferences written by Mark J. Machina and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: Beliefs, Interactions and Preferences in Decision Making mixes a selection of papers, presented at the Eighth Foundations and Applications of Utility and Risk Theory (`FUR VIII') conference in Mons, Belgium, together with a few solicited papers from well-known authors in the field. This book addresses some of the questions that have recently emerged in the research on decision-making and risk theory. In particular, authors have modeled more and more as interactions between the individual and the environment or between different individuals the emergence of beliefs as well as the specific type of information treatment traditionally called `rationality'. This book analyzes several cases of such an interaction and derives consequences for the future of decision theory and risk theory. In the last ten years, modeling beliefs has become a specific sub-field of decision making, particularly with respect to low probability events. Rational decision making has also been generalized in order to encompass, in new ways and in more general situations than it used to be fitted to, multiple dimensions in consequences. This book deals with some of the most conspicuous of these advances. It also addresses the difficult question to incorporate several of these recent advances simultaneously into one single decision model. And it offers perspectives about the future trends of modeling such complex decision questions. The volume is organized in three main blocks: The first block is the more `traditional' one. It deals with new extensions of the existing theory, as is always demanded by scientists in the field. A second block handles specific elements in the development of interactions between individuals and their environment, as defined in the most general sense. The last block confronts real-world problems in both financial and non-financial markets and decisions, and tries to show what kind of contributions can be brought to them by the type of research reported on here.
Book Synopsis Statistics for High-Dimensional Data by : Peter Bühlmann
Download or read book Statistics for High-Dimensional Data written by Peter Bühlmann and published by Springer Science & Business Media. This book was released on 2011-06-08 with total page 568 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern statistics deals with large and complex data sets, and consequently with models containing a large number of parameters. This book presents a detailed account of recently developed approaches, including the Lasso and versions of it for various models, boosting methods, undirected graphical modeling, and procedures controlling false positive selections. A special characteristic of the book is that it contains comprehensive mathematical theory on high-dimensional statistics combined with methodology, algorithms and illustrations with real data examples. This in-depth approach highlights the methods’ great potential and practical applicability in a variety of settings. As such, it is a valuable resource for researchers, graduate students and experts in statistics, applied mathematics and computer science.
Book Synopsis A Theory of Decision-Making Under Risk as a Tradeoff Between Expected Utility, Expected Utility Deviation and Expected Utility Skewness by : Pavlo R. Blavatskyy
Download or read book A Theory of Decision-Making Under Risk as a Tradeoff Between Expected Utility, Expected Utility Deviation and Expected Utility Skewness written by Pavlo R. Blavatskyy and published by . This book was released on 2014 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a new decision theory for modelling choice under risk. The new theory is a two-parameter generalization of expected utility theory. The proposed theory assumes that a decision maker: 1) behaves as if maximizing expected utility; but 2) may experience disappointment (elation) when the utility of a lottery's outcome falls short of (exceeds) the expected utility of the lottery; and 3) may have a preference for gambling (attraction/aversion to positively/negatively skewed lotteries). The proposed theory can rationalize the fourfold pattern of risk attitudes; the common ratio effect and the reverse thereof (in certain types of decision problems); the Allais paradox in classical common consequence problems and the reverse Allais paradox -- in common consequence problems with an even split of a probability mass; violations of the betweenness axiom; switching behavior in the Samuelson's example; violations of ordinal, upper and lower cumulative independence (which falsify rank-dependent utility and cumulative prospect theory); and preference reversals between valuations and choice. Behavioral characterization (axiomatization) of the theory is provided. In application to insurance, the theory can rationalize full insurance with an actuarially unfair premium and aversion to probabilistic insurance. In application to optimal portfolio investment, the theory can rationalize the equity premium puzzle.
Book Synopsis State Dependence in Fundamentals and Preferences Explains Risk-aversion Puzzle by : Bank of Canada
Download or read book State Dependence in Fundamentals and Preferences Explains Risk-aversion Puzzle written by Bank of Canada and published by . This book was released on 2005 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Risk Aversion written by Jubo Yan and published by . This book was released on 2018 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: Expected utility theory (EUT) is a parsimonious theory that explains behavior under risk and uncertainty. Previous research showed that EUT of wealth is not a satisfactory explanation of risk aversion. We use empirical data from a controlled laboratory experiment to show that EUT of income cannot explain risk aversion either. The experimental data suggests that the marginal utility of money would decrease at an absurdly high rate if the concavity of Bernoulli utility function is used to explain risk aversion. We demonstrate that loss aversion together with probability weighting explain the observed risk aversion well. Unlike many previous studies, we elicit valuations-Willingness to Pay (WTP) and Willingness to Accept (WTA)-for risky prospects to make the reference points more salient. Using an empirical model that features reference-dependent preference, we further show that our identi cation is robust to changes in reference points. The obtained parameters from estimating the structural model are consistent with literature.
