temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility …This paper examines preferences towards particular classes of lottery pairs. We show how concepts such as prudence and … framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to …

first-order approximated solution built by perturbation methods accounts for risk. We show that risk matters economically in … a real business cycle (RBC) model with habit formation and capital adjustment costs and that neglecting risk leads to …

Loss aversion, risk aversion, and the probability weighting function (PWF) are three central concepts in explaining … decisionmaking under risk. I examine interlinkages between these concepts in a model of decisionmaking that allows for loss averse … commonly observed shapes of PWF and to risk aversion. In particular, I establish a connection between loss aversion and both …

Consider a simple two-state risk with equal probabilities for the two states. In particular, assume that the random … + XM] dominates the lottery [XN + XM, YN + YM] via (N + M)th-order stochastic dominance. The basic idea is that a decision … maker exhibiting (N + M)th-order stochastic dominance preference will allocate the state-contingent lotteries in such a way …

We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility … function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate … and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk …

The quasi-linear quadratic utility model is widely used in economics. The knowledge of its exact origin is less …

of savings, precautionary savings, loss aversion, and risk. We provide the relevant theory, followed by empirical tests … are less likely to engage in precautionary savings. Present-bias reduces savings. We also show that decision makers save …

parameter. We conclude that in the case of lotteries with big prizes a simultaneous estimate of risk aversion and time … estimate of risk aversion and the time preference discount rate per individual. This can be done because the consumption of a … they are moderately negatively correlated. Furthermore we explain the estimated relative risk aversion and time preference …

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 …