We analyse bidding behaviour in auctions when risk-averse buyers bid for a good whose value is risky. We show that when risk in the valuations increases, DARA bidders will reduce their bids by more than the appropriate increase in the risk premium. Ceteris paribus, buyers will be better off...

This paper shows that a strictly increasing and risk averse utility function with decreasing absolute risk aversion is necessarily differentiable with a positive and absolutely continuous derivative. The cumulative absolute risk aversion function, which is defined as the negative of the...

This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are...

Using a large sample of retail investors as well as experimental data we find that risk and ambiguity aversion are positively correlated. We show the common link is decision style: intuitive thinkers tolerate more risk and ambiguity than effortful reasoners. One interpretation is that intuitive...

We conduct a controlled laboratory experiment where subjects dynamically choose their portfolio allocation between a safe and a risky asset. We first derive analytically the optimal allocation of an expected utility maximizer with HARA utility function. We then fit the experimental choices to...

Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental...

We use data from a television game show, involving elementary lotteries and substantial prize money, as a natural experiment to measure risk attitudes. We find robust evidence of substantial risk aversion. As an extension, we esimate the various models using transformations of the ‘true’...

The preferred risk habitat hypothesis, introduced here, is that individual investors select stocks with volatilities commensurate with their risk aversion; more risk-averse individuals pick lower-volatility stocks. The investors' portfolio perspective overlooks return correlations. The data,...