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Contents
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1. News 2. Events ( December November October September August July June May April March February January 2010 Undated 2009 Undated 2008 Undated 2007 Undated ) 3. Utility Problems (St. Petersburg Paradox Allais Paradox Equity Premium Puzzle Risk Aversion Gains and Losses Loss Aversion Overweighting of low Probabilities Underweighting of high Probabilities "Four-Fold-Pattern" Shape of Probability Weighting Function Ellsberg Paradox Preference Reversals ) 4. New Approach. Principle of Uncertain Future 5. Solution of Problems (of St. Petersburg Paradox of Allais Paradox of Equity Premium Puzzle of Risk Aversion of Gains and Losses of Loss Aversion of Overweighting of low Probabilities of Underweighting of high Probabilities of "Four-Fold-Pattern" of Shape of Probability Weighting Function of Ellsberg Paradox of Preference Reversals )
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Utility & Prospect & Decision Theories Metadata
1. News Cumulative prospect theory challenges traditional expected utility theory Saziye Gazioglu and Nilifer Cal?skan Applied Financial Economics 2011 Abstract The evolution of decision and experienced utility Arthur Robson and Larry Samuelson Theoretical Economics 2011 Abstract REGARDS UPON EVOLUTION OF UTILITY THEORY - THE FUNDAMENTAL ELEMENT IN PRICE ESTABLISHMENT Viorica Stan Theoretical and Applied Economics 2011 Abstract Utility-Based Valuation and Hedging of Basis Risk With Partial Information Michael Monoyios Applied Mathematical Finance 2010 Abstract Empirical comparative statics under price and output uncertainty Moawia Alghalith Journal of Applied Statistics 2009 Abstract Testing expected utility maximization under price and quantity risk with a heterogeneous panel Yucan Liu and C. Richard Shumway Applied Economics 2009 Abstract Top
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Utility & Prospect & Decision Theories Metadata
2. Events Metadata added/revised in December
Econometric Effects of Utility Order-Preserving Transformations in Discrete Choice Models Francisco Javier Amador and Elisabetta Cherchi Networks and Spatial Economics 2011 Abstract On intermediate utility functions Thomas Eichner Quality & Quantity: International Journal of Methodology 2009 Abstract Is Expected Utility Theory Applicable? A Revealed Preference Test David R. Just and Hikaru Hanawa Peterson American Journal of Agricultural Economics 2010 Abstract THE CARDINALIST MANIFESTO: THE EPISTEMOLOGY OF THE MEASURABILITY OF UTILITY Jonathan Andreas Journal of the History of Economic Thought 2011 Abstract The Individual Taxpayer Utility Function with Tax Optimization and Fiscal Fraud Environment Pawe? Pankiewicz "e-Finanse" 2011 Abstract Top
Metadata added/revised in November
A Hayekian Economic Model of Thinking Coca Veronica Ovidius University Annals, Economic Sciences Series 2011 Abstract Can non-expected utility theories explain the paradox of not voting? Serge Blondel and Louis LA©vy-garboua Economics Bulletin 2011 Abstract Top
Metadata added/revised in October
Identity, Utility, and Cooperative Behaviour: An Evolutionary Perspective Philipp C. Wichardt 2011 Abstract Precautionary Saving and Endogenous Labor Supply with and without Intertemporal Expected Utility Diego Nocetti and William T. Smith Journal of Money, Credit and Banking 2011 Abstract Risk-averse asymptotics for reservation prices Laurence Carassus and Miklos Rasonyi Annals of Finance 2011 Abstract A theorem for Bayesian group decisions Ralph Keeney and Robert Nau Journal of Risk and Uncertainty 2011 Abstract Continuity of utility functions representing fuzzy preferences Louis Fono and Maurice Salles Social Choice and Welfare 2011 Abstract Attitudes toward uncertainty and randomization: an experimental study Adam Dominiak and Wendelin Schnedler Economic Theory 2011 Abstract Dynamic consistency for non-expected utility preferences Vassili Vergopoulos Economic Theory 2011 Abstract Multivariate utility maximization with proportional transaction costs Luciano Campi and Mark Owen Finance and Stochastics 2011 Abstract Utility indifference valuation for jump risky assets Claudia Ceci and Anna Gerardi Decisions in Economics and Finance 2011 Abstract Interval scalability of rank-dependent utility Mikhail V. Sokolov Theory and Decision 2011 Abstract Top
Metadata added/revised in September
Modeling non-monotone risk aversion using SAHARA utility functions An Chen, Antoon Pelsser and Michel Vellekoop Journal of Economic Theory 2011 Abstract Cumulative prospect theory challenges traditional expected utility theory Saziye Gazioglu and Nilifer Cal?skan Applied Financial Economics 2011 Abstract Ambiguity, the certainty illusion, and the natural frequency approach to reasoning with inverse probabilities John Fountain and Philip Gunby New Zealand Economic Papers 2011 Abstract The Distorted Theory of Rank-Dependent Expected Utility Hui Huang and Shunming Zhang Annals of Economics and Finance 2011 Abstract The evolution of decision and experienced utility Arthur Robson and Larry Samuelson Theoretical Economics 2011 Abstract REGARDS UPON EVOLUTION OF UTILITY THEORY - THE FUNDAMENTAL ELEMENT IN PRICE ESTABLISHMENT Viorica Stan Theoretical and Applied Economics 2011 Abstract Utility-Based Valuation and Hedging of Basis Risk With Partial Information Michael Monoyios Applied Mathematical Finance 2010 Abstract Empirical comparative statics under price and output uncertainty Moawia Alghalith Journal of Applied Statistics 2009 Abstract Testing expected utility maximization under price and quantity risk with a heterogeneous panel Yucan Liu and C. Richard Shumway Applied Economics 2009 Abstract Top
Metadata added/revised in August
Philip Schofield, Utility and Democracy: The Political Thought of Jeremy Bentham Stephen G. Engelmann Utilitas 2010 Abstract J. S. Mill's Conception of Utility Ben Saunders Utilitas 2010 Abstract The creator, human conduct and the maximisation of utility in Gossen's economic theory Philippe Steiner European Journal of the History of Economic Thought 2011 Abstract Measuring welfare changes in behavioural microsimulation modelling: Accounting for the random utility component John Creedy, Nicolas Herault and Guyonne Kalb Journal of Applied Economics 2011 Abstract Pricing jump risk with utility indifference Lixin Wu and Min Dai Quantitative Finance 2009 Abstract Is individual rationality essential to market price formation? The contribution of zero-intelligence agent trading models Paola Tubaro Journal of Economic Methodology 2009 Abstract Information, Expected Utility, and Portfolio Choice Jun Liu, Ehud Peleg and Avanidhar Subrahmanyam Journal of Financial and Quantitative Analysis 2010 Abstract Defining Trust Using Expected Utility Theory Arai Kazuhiro Hitotsubashi Journal of Economics 2009 Abstract Top
Metadata added/revised in July
Ambiguity, Risk and Portfolio Choice under Incomplete Information Jianjun Miao Annals of Economics and Finance 2009 Abstract Questions in Decision Theory Itzhak Gilboa Annual Review of Economics 2010 Abstract A Quantitative Measurement of Regret Theory Han Bleichrodt, Alessandra Cillo and Enrico Diecidue Management Science 2010 Abstract Modifying the Mean-Variance Approach to Avoid Violations of Stochastic Dominance Pavlo R. Blavatskyy Management Science 2010 Abstract Risk Preferences at Different Time Periods: An Experimental Investigation Mohammed Abdellaoui, Enrico Diecidue and Ayse Onculer Management Science 2011 Abstract Risk aversion for nonsmooth utility functions Andreas Wurth and Johannes M. Schumacher Journal of Mathematical Economics 2011 Abstract The risk premium and the effects of risk on agents utility Mario Menegatti Research in Economics 2011 Abstract Additive Utility in Prospect Theory Han Bleichrodt, Ulrich Schmidt and Horst Zank Management Science 2009 Abstract Probabilistic risk aversion with an arbitrary outcome set Pavlo R. Blavatskyy Economics Letters 2011 Abstract Limited Experienced Happiness or Unlimited Expected Utility, What About the Differences? Jan Ott Journal of Happiness Studies 2011 Abstract Dynamic Investment Strategies to Reaction–Diffusion Systems Based upon Stochastic Differential Utilities Akira Kashiwabara and Nobuhiro Nakamura Asia-Pacific Financial Markets 2011 Abstract Top
Metadata added/revised in June
Pleasures of Benthamism: Victorian Literature, Utility, Political Economy Kathleen Blake OUP Catalogue from Oxford University Press 2009 Abstract Utility and Democracy: The Political Thought of Jeremy Bentham Philip Schofield OUP Catalogue from Oxford University Press 2009 Abstract Human needs and utility maximization Katherine B. Freeman International Journal of Social Economics 2011 Abstract Measuring welfare changes in behavioural microsimulation modelling: Accounting for the random utility component John Creedy, Nicolas Herault and Guyonne Kalb Journal of Applied Economics 2011 Abstract Top
Metadata added/revised in May
Uncertainty and measurement error in welfare models for risk changes Mary Riddel Journal of Environmental Economics and Management 2011 Abstract Personality and the marginal utility of income: Personality interacts with increases in household income to determine life satisfaction Christopher J. Boyce and Alex M. Wood Journal of Economic Behavior & Organization 2011 Abstract Mixture models of choice under risk Anna Conte, John Hey and Peter G. Moffatt Journal of Econometrics 2011 Abstract A value function that explains the magnitude and sign effects Ali al-Nowaihi and Sanjit Dhami Economics Letters 2009 Abstract Top
Metadata added/revised in April
Utility Maximization Subject to Multiple Constraints Jamal Nazrul Islam, Haradhan Kumar Mohajan and Pahlaj Moolio Indus Journal of Management & Social Science (IJMSS) 2010 Abstract Pleasures of Benthamism: Victorian Literature, Utility, Political Economy Kathleen Blake OUP Catalogue from Oxford University Press 2009 Abstract Utility and Democracy: The Political Thought of Jeremy Bentham Philip Schofield OUP Catalogue from Oxford University Press 2009 Abstract Pricing of the time-change risks Ivan Shaliastovich and George Tauchen Journal of Economic Dynamics and Control 2011 Abstract A new existence result for quadratic BSDEs with jumps with application to the utility maximization problem Marie-Amelie Morlais Stochastic Processes and their Applications 2010 Abstract Endogenous discounting and the domain of the felicity function Ingmar Schumacher Economic Modelling 2011 Abstract The hunt for a descriptive theory of choice under risk -- A view from the road not taken Jonathan W. Leland The Journal of Socio-Economics 2010 Abstract Top
Metadata added/revised in March
Subadditivity, patience, and utility: The effects of dividing time intervals Patrick McAlvanah Journal of Economic Behavior & Organization 2010 Abstract An additively separable representation in the Savage framework Brian Hill Journal of Economic Theory 2010 Abstract Rank-ordering of risk preferences with conventional and discrete measures Joseph G. Eisenhauer The Quarterly Review of Economics and Finance 2010 Abstract Power utility maximization under partial information: Some convergence results D. Covello and M. Santacroce Stochastic Processes and their Applications 2010 Abstract Information and preference reversals in lotteries Niyazi Onur BakIr and Georgia-Ann Klutke European Journal of Operational Research 2011 Abstract The reasoning-based expected utility procedure Robin Cubitt and Robert Sugden Games and Economic Behavior 2011 Abstract Decision principles derived from risk measures Marc J. Goovaerts, Rob Kaas and Roger J.A. Laeven Insurance: Mathematics and Economics 2010 Abstract Preferences with frames: A new utility specification that allows for the framing of risks Nicholas Barberis and Ming Huang Journal of Economic Dynamics and Control 2009 Abstract Evaluation of similarity models for expected utility violations David E. Buschena and Joseph A. Atwood Journal of Econometrics 2011 Abstract Are CEOs expected utility maximizers? John List and Charles F. Mason Journal of Econometrics 2011 Abstract How loss averse are investors in financial markets? Soosung Hwang and Steve E. Satchell Journal of Banking & Finance 2010 Abstract Top
Metadata added/revised in February
A Simple Metric for Gauging Risk Aversion Joseph G. Eisenhauer Asia-Pacific Journal of Risk and Insurance 2010 Abstract The Substitution and the Revenue Effects for a Cobb-Douglas Utility Function Catalin Angelo Ioan and Gina E. Ioan Economics and Applied Informatics 2010 Abstract Top
Metadata added/revised in January
Efficiency and utility: an evolutionary perspective Stefan Mann and Henry Wustemann International Journal of Social Economics 2010 Abstract Second-Order Ambiguity in Very Low Probability Risks: Food Safety Valuation Paul A. Kivi and Jason Shogren Journal of Agricultural and Resource Economics 2010 Abstract Recent Developments in the Intertemporal Modeling of Uncertainty Christian P. Traeger Annual Review of Resource Economics 2009 Abstract Top
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Metadata added/revised in 2010 Undated
Finances, in the Light of Utility and Equity Criteria Mario Pagliacci, Constantin Anghelache and Dan Armeanu Theoretical and Applied Economics 2008 Abstract J. S. Mill's Conception of Utility Ben Saunders Utilitas 2010 Title Optimal taxation in the presence of tax evasion: Expected utility versus prospect theory Sanjit Dhami and Ali Al-Nowaihi Journal of Economic Behavior & Organization 2010 Title On the Utility of Money Gancho Todorov Ganchev Economic Studies journal 2010 Abstract UTILITY MAXIMIZATION IN AFFINE STOCHASTIC VOLATILITY MODELS Jan Kallsen and Johannes Muhle-Karbe International Journal of Theoretical and Applied Finance (IJTAF) 2010 Abstract Anomalies in intertemporal choice, time-dependent uncertainty and expected utility - A common approach Herbert Walther Journal of Economic Psychology 2010 Abstract Indeterminacy and expectation-driven fluctuations with non-separable preferences Kazuo Nishimura and Alain Venditti Mathematical Social Sciences 2010 Abstract Reverse common ratio effect Pavlo Blavatskyy Journal of Risk and Uncertainty 2010 Abstract The Limitations of Prospect Theory and the Expected Utility Theory: A New Theory Moawia Alghalith Atlantic Economic Journal 2010 Abstract Decision Making by Hybrid Probabilistic - Possibilistic Utility Theory Endre Pap Panoeconomicus 2009 Abstract Expected utility paradoxes Lindon Robison, Robert Shupp and Robert J. Myers The Journal of Socio-Economics 2010 Abstract A Theory of Vague Expected Utility Paola Manzini and Marco Mariotti The B.E. Journal of Theoretical Economics 2004 Abstract Information, evolution and utility Jeroen Swinkels and Larry Samuelson Theoretical Economics 2006 Abstract Beyond Earthquakes: The New Directions of Expected Utility Theory Felipe Zurita Latin American Journal of Economics-formerly Cuadernos de Economia 2005 Abstract Decision, Probability and Utility Peter Gardenfors and Nils-Eric Sahlin Cambridge Books from Cambridge University Press 1988 Abstract THE UTILITY OF THE CONSUMER FROM THE ANCIENTS TO THE CLASSICS Cristina Gabriela ZAMFIR and Gabriela VIRLAN EuroEconomica 2009 Abstract An Explanation of Optimal Each-Way Bets based on Non-Expected Utility Theory David A. Peel and Davind Law Journal of Gambling Business and Economics 2009 Abstract Rationality on the rise: Why relative risk aversion increases with stake size Helga Fehr-Duda, Adrian Bruhin, Thomas Epper and Renate Schubert Journal of Risk and Uncertainty 2010 Abstract An Essay on the Origin of the Rational Utility Maximization Hypothesis and a Suggested Modification Ken McCormick Eastern Economic Journal 1997 Abstract An Allais paradox for generalized expected utility theories? Laetitia Placido and Olivier l'Haridon Economics Bulletin 2008 Abstract The valuation of decision and individual welfare: a Humean approach Andre Lapidus European Journal of the History of Economic Thought 2010 Abstract On probabilities and loss aversion Horst Zank Theory and Decision 2010 Abstract What is Utility? D. W. Haslett Economics and Philosophy 1990 Abstract Utility: Ideas and Terminology Amartya Sen Economics and Philosophy 1991 Abstract A utility representation theorem with weaker continuity condition Tomoki Inoue Journal of Mathematical Economics 2010 Abstract The Public Finances, the Utility of the Taxpayer and the Public Services – towards a New Connecting Model? Marcel Ioan Bolos Theoretical and Applied Economics 2007 Abstract Portfolio selection in stochastic markets with HARA utility functions Ethem Canakoglu and Suleyman Ozekici European Journal of Operational Research 2010 Abstract The Dissociation Between Monetary Assessment and Predicted Utility On Amir, Dan Ariely and Ziv Carmon Marketing Science 2008 Abstract Top
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Metadata added/revised in 2009 Undated
Comparison of Mean-Variance Theory and Expected-Utility Theory through a Laboratory Experiment Andrea Morone Economics Bulletin 2008 Abstract The shape of the utility function under risk in the loss domain and the "ruinous losses" hypothesis: some experimental results Nathalie Etchart-Vincent Economics Bulletin 2009 Abstract A simple test for the violation of the non-satiation axiom under uncertainty: The theory Robert Sproule and Calin Valsan Economics Bulletin 2009 Abstract A Note on Utility Maximization with Unbounded Random Endowment Keita Owari Institute of Economic Research, Hitotsubashi Unive... 2009-10 Abstract The origin of utility: Sexual selection and conspicuous consumption Gianni De Fraja Journal of Economic Behavior & Organization 2009 Abstract How Sapient is Homo Economicus? The Evolutionary Origins of Trade, Ethics and Economic Rationality Kaushik Basu esocialsciences.com 2009 Abstract Robust Exponential Hedging in a Brownian Setting Keita Owari Institute of Economic Research, Hitotsubashi Unive... 2009-09 Abstract Utility-Based Utility David Cass Penn Institute for Economic Research, Department o... 2008 Abstract Distortion of probability and outcome information in risky decisions Michael L. DeKay, Patino-Echeverri, Dalia and Paul S. Fischbeck Organizational Behavior and Human Decision Process... 2009 Abstract Elementary non-Archimedean utility theory Frederik S. Herzberg Mathematical Social Sciences 2009 Abstract Decision Making and Trade without Probabilities Jack Douglas Stecher, Radhika Lunawat, Kira Pronin and John DIckhaut CIRANO 2007 Abstract A CLOSER LOOK AT UTILITY MAXIMISED BY ECONOMIC AGENTS Michal Skorepa Politicka ekonomie 2008 Abstract Vector Expected Utility and Attitudes Toward Variation Marciano Siniscalchi Econometrica 2009 Abstract THE UTILITY OF THE CONSUMER FROM THE ANCIENTS TO THE CLASSICS Cristina Gabriela ZAMFIR and Gabriela VIRLAN EuroEconomica 2009 Abstract A simple model of cumulative prospect theory Ulrich Schmidt and Horst Zank Journal of Mathematical Economics 2009 Abstract A More General Non-expected Utility Model as an Explanation of Gambling Outcomes for Individuals and Markets David Peel and David Law Economica 2009 Abstract Nozick, Ramsey, and Symbolic Utility Wesley Cooper Utilitas 2008 Abstract Comparing Fuzzy and Probabilistic Approaches to Preference Uncertainty in Non-Market Valuation Lili Sun and G. Kooten Environmental & Resource Economics 2009 Title Pricing jump risk with utility indifference Lixin Wu and Min Dai Quantitative Finance 2009 Abstract A reformulation of the maxmin expected utility model with application to agency theory Edi Karni Journal of Mathematical Economics 2009 Abstract Debreu-like properties of utility representations A. Caserta, A. Giarlotta and S. Watson Journal of Mathematical Economics 2008 Abstract Something for nothing: A model of gambling behavior John Nyman, John W. Welte and Bryan E. Dowd The Journal of Socio-Economics 2008 Abstract Decentralized trade, random utility and the evolution of social welfare Michihiro Kandori, Roberto Serrano and Oscar Volij Journal of Economic Theory 2008 Abstract Top
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Metadata added/revised in 2008 Undated
Explaining the characteristics of the power (CRRA) utility family Peter P. Wakker Health Economics 2008 Abstract Asymmetric or symmetric time preference and discounting in many facets of economic theory: A miscellany Paul Samuelson Journal of Risk and Uncertainty 2008 Title A Geometric Measure for the Violation of Utility Maximization Jan Heufer Rheinisch-Westfalisches Institut fur Wirtschaftsfo... 2008-09 Abstract Text Ranking completely uncertain decisions by the uniform expected utility criterion Nicolas Gravel, Thierry Marchant and Arunava Sen Institut d'economie publique (IDEP), Marseille, Fr... 2007-07 Abstract Text Calibration Results for Non-Expected Utility Theories Zvi Safra and Uzi Segal Econometrica 2008 Abstract How can a psychologist inform economics? The strange case of Sidney Siegel Alessandro Innocenti Department of Economic Policy, Finance and Develop... 2008-07 Abstract An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data Andrea Morone and Ulrich Schmidt Economics Bulletin 2008 Abstract Text A new approach to modeling decision-making under uncertainty Edi Karni Economic Theory 2007 Title A tractable method to measure utility and loss aversion under prospect theory Mohammed Abdellaoui, Han Bleichrodt and Olivier L’Haridon Journal of Risk and Uncertainty 2008 Title Utility of gambling II: risk, paradoxes, and data R. Luce, C. Ng, A. Marley and Janos Aczel Economic Theory 2008 Title Walrasian Solutions Without Utility Functions C-Rene Dominique University Library of Munich, Germany 2008 Abstract Text Non-classical expected utility theory with application to type indeterminacy Vladimir I. Danilov and Ariane Lambert-Mogiliansky PSE (Ecole normale superieure) 2007 Abstract Text Decision Making and Trade without Probabilities Jack Douglas Stecher, Radhika Lunawat, Kira Pronin and John Dickhaut CIRANO 2007-10 Abstract Text Expected utility inequalities: theory and applications Eduardo Zambrano Economic Theory 2008 Title Economics is philosophy, economics is not science Rupert Read International Journal of Green Economics 2007 Abstract Relativity, Rank and the Utility of Income Matthew D. Rablen Economic Journal 2008 Abstract Great Expectations. Part I: On the Customizability of Generalized Expected Utility Francis Chu and Joseph Halpern Theory and Decision 2008 Title On Ordinal Utility, Cardinal Utility and Random Utility Richard Batley Theory and Decision 2008 Title Risk preferences and changes in background risk Donald Keenan, Donald Rudow and Arthur Snow Journal of Risk and Uncertainty 2008 Title Generalized expected utility, heteroscedastic error, and path dependence in risky choice David Buschena and David Zilberman Journal of Risk and Uncertainty 2008 Title Utility function of fuzzy preferences on a countable set under max-*-transitivity Louis Fono and Nicolas Andjiga Social Choice and Welfare 2007 Title ANTICIPATED UTILITY AND RATIONAL EXPECTATIONS AS APPROXIMATIONS OF BAYESIAN DECISION MAKING Timothy Cogley and Thomas Sargent International Economic Review 2008 Abstract A Model of Utility Smoothing Katsutoshi Wakai Econometrica 2008 Abstract Interpretations Of Utility And Their Implications For The Valuation Of Health Paul Dolan and Daniel Kahneman Economic Journal 2008 Abstract Top
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Metadata added/revised in 2007 Undated
Non-classical expected utility theory with application to type indeterminacy Vladimir I. Danilov and Ariane Lambert-Mogiliansky PSE (Ecole normale superieure) 2007 Abstract Text Comparison of Mean-Variance Theory and Expected-Utility Theory through a Laboratory Experiment Andrea Morone Dipartimento di Scienze Economiche - Universita di... 2007-10 Abstract Text Institutions for Intuitive Man Engel Christoph Max Planck Institute for Research on Collective Go... 2007-08 Abstract Text Parametric Weighting Functions Enrico Diecidue, Ulrich Schmidt and Horst Zank Christian-Albrechts-University of Kiel, Department... 2007 Abstract Text An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data Andrea Morone and Ulrich Schmidt Christian-Albrechts-University of Kiel, Department... 2006 Abstract Text Risk Aversion, Wealth, and Background Risk Luigi Guiso and Monica Paiella European University Institute 2007 Abstract Text What Determines the Shape of the Probability Weighting Function? Fehr-Duda, Helga, Marc Schurer and Renate Schubert CER-ETH - Center of Economic Research (CER-ETH) at... 2006 Abstract Text Explaining the anomalies of the exponential discounted utility model Ali al-Nowaihi and Sanjit Dhami Department of Economics, University of Leicester 2007-09 Abstract Text Imprecision as an Account of the Preference Reversal Phenomenon David J. Butler and Graham C. Loomes American Economic Review 2007 Abstract About: "... any successful descriptive theory of choice and valuation will need to allow in some way for the imprecision ..." A New Method of Estimating Risk Aversion Raj Chetty American Economic Review 2006 Abstract Prospect-theory’s Diminishing Sensitivity Versus Economics’ Intrinsic Utility of Money: How the Introduction of the Euro can be Used to Disentangle the Two Empirically Peter Wakker, Veronika Kobberling and Christiane Schwieren Theory and Decision 2007 Abstract Risk aversion and expected-utility theory: A calibration exercise Laura Schechter Journal of Risk and Uncertainty 2007 Abstract Valuing A Risky Prospect Less Than Its Worst Outcome: Uncertainty Effect or Task Ambiguity? Andreas Ortmann, Alexandra Prokosheva, Ondrej Rydval and Ralph Hertwig Friedrich-Schiller-University Jena, Max-Planck-Ins... 2007-07-18 Abstract Text The Origin of Utility Gianni De Fraja C.E.P.R. Discussion Papers 2006 Abstract Experienced Utility as a Standard of Policy Evaluation Daniel Kahneman and Robert Sugden Environmental & Resource Economics 2005 Abstract The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions John A. List Journal of Political Economy 2006 Abstract Text of the corresponding Working Paper On the Paradigm of Loss Aversion Horst Zank School of Economics, The University of Manchester 2007 Title Would You Be Happier If You Were Richer? A Focusing Illusion Daniel Kahneman, Alan Krueger, David Schkade, Norbert Schwarz and Arthur Stone Princeton University, Department of Economics, Cen... 2006 Abstract Text Top
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3. Utility Problems & Paradoxes
(more)
The Allais paradox (modified)
Suppose Mr. Somebody offers you a choice of only one of the following: A guaranteed gain of $99. Or A lottery: The gain of $100 with the probability P(preliminary) = 99% or $0 with the (preliminary) probability 1%. The mathematical expectations of guarantee and lottery outcomes are exactly the same. But people chose the guaranteed gain instead of the lottery. Top
Gains and Losses
Compare two experiments: 1) Mr. Somebody offers you a choice of only one of the following: A guaranteed gain of $99. Or A lottery: The gain of $100 with the probability P(preliminary) = 99% or $0 with the (preliminary) probability 1%. 2) Mr. Somebody offers you a choice of only one of the following: A guaranteed loss of $99. Or A lottery: The loss of $100 with the probability P(preliminary) = 99% or $0 with the (preliminary) probability 1%. The mathematical expectations of the guarantee and lottery outcomes are exactly the same in both experiments. But in similar experiments, the overwhelming majority of people chose: - in the case of gains - the guaranteed gain instead of the lottery one. - in the case of losses - the lottery loss instead of the guaranteed one. The possible well-known "natural and clear explanation" of gains in the Allais paradox by means of risk aversion cannot supply any uniform explanation for both gains and losses. The result of this explanation is gains' risk aversion and losses' risk seeking. Top
Overweighting of low Probabilities
Suppose Mr. Somebody offers you a choice of only one of the following: A guaranteed gain of $1. Or A lottery: The gain of $100 with the probability P(preliminary) = 1% or $0 with the (preliminary) probability 1%. The mathematical expectations of guarantee and lottery outcomes are exactly the same. But the well-determined experimental fact is: in similar experiments the obvious majority of people chose the lottery instead of the guaranteed gain.
Four-Fold-Pattern
The well-determined facts are: For positive (gains) risky prospects, people typically 1) overweight low probabilities but 2) underweight high probabilities. For negative (losses) risky prospects, people typically 3) underweight low probabilities but 4) overweight high probabilities. Top
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4. New Approach
(more)
The idea of the approach
Particular consideration of (hidden) uncertainties (noises, fluctuations, measurements' errors, imprecision, etc.)
Principle of Uncertain Future
(simplified as much as possible)
The principle
The probability of a future event contains uncertainty.
4.1. The first consequence of the principle
Suppose we plan to test the probability value, which is equal to 99%. Suppose the probability uncertainty value is equal to 5%. Then, evidently, the real mean value of probability cannot be as high as 99%. Generally, High probabilities will decrease.
Phigh real < Phigh planned
Analogously, but considering the second consequence of the principle (see below),
Low probabilities can increase.
Plow real possible > Plow planned
4.2. The second consequence of the principle
The total probability of unforeseen future events is more than 0%
Σ Punforeseen real > 0%
Hence,
The present total probability of future events is less than 100%
Σ Pplanned < 100%
or
The present probability system of future events is incomplete. Top
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5. Solution of Problems
(more)
The strongest qualitative test is the 4-Fold-Pattern.
Solution & Explanation
of the 4-Fold-Pattern (simplified as much as possible) The well-determined facts are: For positive (gains) risky prospects, people typically 1) overweight low probabilities but 2) underweight high probabilities. For negative (losses) risky prospects, people typically 3) underweight low probabilities but 4) overweight high probabilities. Denoting the real value of probability, which value is near 100% as Phigh real , the (positive) value of gain as G and the (negative) value of loss as -G , we obtain
Phigh real < Phigh planned
and
G * Phigh real < G * Phigh planned
-G * Phigh real > -G * Phigh planned
2) the underweight of high probabilities gains and 4) the overweight of high probabilities losses. Denoting the real value of probability, which value is near 0% as Plow real possible we obtain
Plow real possible > Plow planned
and
G * Plow real possible > G * Plow planned
-G * Plow real possible < -G * Plow planned
1) the overweight of low probabilities gains and 3) the underweight of low probabilities losses. Thus, the above facts can be explained naturally and uniformly. Top
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