Showing 1 - 10 of 34
A principal provides budgets to agents (e.g., divisions of a firm or the principal’s children) whose expenditures provide her benefits, either materially or because of altruism. Only agents know their potential to generate benefits. We prove that if the more “productive” agents are also...
Persistent link: https://www.econbiz.de/10010987804
Building on Kihlstrom and Mirman (Journal of Economic Theory, 8(3), 361–388, <CitationRef CitationID="CR4 … relationship between changes in risk aversion and classical demand theory. We show that the effect of risk aversion on optimal …
Persistent link: https://www.econbiz.de/10010987805
. In contrast to commonly used utility functions, prospect theory can predict this behavioral pattern. In our experiment …
Persistent link: https://www.econbiz.de/10010987807
An ever increasing number of experiments attempts to elicit risk preferences of a population of interest with the aim of calibrating parameters used in economic models. We are concerned with two types of selection effects, which may affect the external validity of standard experiments: Sampling...
Persistent link: https://www.econbiz.de/10010987809
This paper presents the Bomb Risk Elicitation Task (BRET), an intuitive procedure aimed at measuring risk attitudes. Subjects decide how many boxes to collect out of 100, one of which contains a bomb. Earnings increase linearly with the number of boxes accumulated but are zero if the bomb is...
Persistent link: https://www.econbiz.de/10010987810
I collect data on subjects’ risk attitudes using real and hypothetical risky choices. I also measure their cognitive ability using the cognitive reflective test (CRT). On average, measured risk preferences are not significantly different across real and hypothetical settings. However,...
Persistent link: https://www.econbiz.de/10010987816
risk aversion in losses. This fourfold pattern was not addressed by either version of prospect theory (Kahneman and Tversky …:297–323, <CitationRef CitationID="CR43">1992</CitationRef>). We show how prospect theory can accommodate the pattern by combining an … overweighting of low probabilities with a decreasingly elastic value function. We then examine the performance of prospect theory …
Persistent link: https://www.econbiz.de/10010987820
The economic theory of decision making under risk has seen remarkable advances over the 50 years since Pratt’s (1964 …
Persistent link: https://www.econbiz.de/10010987821
This paper suggests a new explanation for the low level of annuitization, which is valid even if one assumes perfect markets. We show that, as soon there is a positive bequest motive, sufficiently risk averse individuals should not purchase annuities. A model calibration accounting for lifetime...
Persistent link: https://www.econbiz.de/10010863417
This paper examines the demand and supply of annual and multi-year insurance contracts with respect to protection against a catastrophic risk in a competitive market. Insurers who offer annual policies can cancel policies at the end of each year and change the premium in the following year....
Persistent link: https://www.econbiz.de/10010863419