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Putting risk in its proper place
Eeckhoudt, Louis; Schlesinger, Harris - 2005
This paper examines preferences towards particular classes of lottery pairs. We show how concepts such as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the...
Persistent link: https://www.econbiz.de/10010271070
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A Comparison of Regret Theory and Salience Theory for Decisions under Risk
Herweg, Fabian - 2020
Two non-transitive theories to model decision making under risk are regret theory (Loomes and Sugden, 1982, 1987) and … salience theory (Bordalo, Gennaioli, and Shleifer, 2012). While the psychological underpinning of these two approaches is … of choice behavior. We investigate the overlap between these theories and show that original regret theory (Loomes and …
Persistent link: https://www.econbiz.de/10012850081
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Risk Matters : Breaking Certainty Equivalence
Parra-Alvarez, Juan Carlos - 2020
In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...
Persistent link: https://www.econbiz.de/10012834991
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Consumer Loss Aversion and Scale-Dependent Psychological Switching Costs
Karle, Heiko; Schumacher, Heiner; Vølund, Rune - 2021
We consider the Salop (1979) model of product differentiation and assume that consumers are uncertain about the qualities and prices of firms’ products. They can inspect all products at zero cost. A share of consumers is expectation-based loss averse. For these consumers, a purchase plan,...
Persistent link: https://www.econbiz.de/10013211121
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Ambiguous Protection
Gründler, Klaus; Hillman, Arye - 2021
Import regulations are globally the most prevalent form of intervention in international trade. The regulations should, under rules of the WTO, protect consumers and the environment but can be used to protect producers. We investigate the ambiguity of intent. We set out a model that when applied...
Persistent link: https://www.econbiz.de/10013246466
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Control Aversion in Hierarchies
De Chiara, Alessandro; Engl, Florian; Herz, Holger; … - 2022
Companies typically control various aspects of their workers’ behaviors. In this paper, we investigate whether the hierarchical distance of the superior who imposes such control measures matters for the workers’ ensuing reaction. In particular, we test, in a laboratory experiment, whether...
Persistent link: https://www.econbiz.de/10014082243
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Precautionary Savings, Loss Aversion, and Risk : Theory and Evidence
Dhami, Sanjit; Hajimoladarvish, Narges; Georgalos, … - 2023
of savings, precautionary savings, loss aversion, and risk. We provide the relevant theory, followed by empirical tests …
Persistent link: https://www.econbiz.de/10014346247
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Loss Aversion, Risk Aversion, and the Shape of the Probability Weighting Function
Rablen, Matthew D. - 2023
extend to distinct PWFs in the gain and loss domains, as under prospect theory …
Persistent link: https://www.econbiz.de/10014350127
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Loss Aversion and Tax Evasion : Theory and Evidence
Dhami, Sanjit; Hajimoladarvish, Narges; Mamidi, Pavan - 2023
estimation of the underlying behavioral parameters; and confirms the central predictions of the theory, while pointing out … challenges for further developments that existing theory is unable to account for …
Persistent link: https://www.econbiz.de/10014262742
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World Equity Premium Based Risk Aversion Estimates
Pozzi, Lorenzo - 2013
The equity premium puzzle holds that the coefficient of relative risk aversion estimated from the consumption based CAPM under power utility is excessively high. Moreover, estimates in the literature vary considerably across countries. We gauge the uncertainty pertaining to the country risk...
Persistent link: https://www.econbiz.de/10013094420