Showing 1 - 10 of 51
We study the attitude of decision makers to skewed noise. For a binary lottery that yields the better outcome with probability $p$, we identify noise around $p$, with a compound lottery that induces a distribution over the exact value of the probability and has an average value p. We propose and...
Persistent link: https://www.econbiz.de/10011204502
Maximizing subjective expected utility is the classic model of decision making under uncertainty. Savage (1954) provides axioms on preference over acts that are equivalent to the existence of a subjective expected utility representation, and further establishes that such a representation is...
Persistent link: https://www.econbiz.de/10011184269
Many violations of the Independence axiom of Expected Utility can be traced to subjects' attraction to risk-free prospects. Negative Certainty Independence, the key axiom in this paper, formalizes this tendency. Our main result is a utility representation of all preferences over monetary...
Persistent link: https://www.econbiz.de/10010822868
We show that political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging...
Persistent link: https://www.econbiz.de/10010822881
We propose a model of history-dependent risk attitude, allowing a decision maker’s risk attitude to be affected by his history of disappointments and elations. The decision maker recursively evaluates compound risks, classifying realizations as disappointing or elating using a threshold rule....
Persistent link: https://www.econbiz.de/10010822906
We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst. We elicit subjective information directly from choice behavior by deriving two utility representations of preferences over menus of acts. One representation...
Persistent link: https://www.econbiz.de/10010822917
We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst. We elicit subjective information directly from choice behavior by deriving two utility representations of preferences over menus of acts. The most general...
Persistent link: https://www.econbiz.de/10010822938
Many violations of the Independence axiom of Expected Utility can be traced to subjects' attraction to risk-free prospects. The key axiom in this paper, Negative Certainty Independence (Dillenberger, 2010), formalizes this tendency. Our main result is a utility representation of all preferences...
Persistent link: https://www.econbiz.de/10010743117
We study an individual who faces a dynamic decision problem in which the process of information arrival is unobserved by the analyst, and hence should be identified from observed choice data. An information structure is objectively describable if signals correspond to events of the objective...
Persistent link: https://www.econbiz.de/10010578420
We study a decision maker who faces a dynamic decision problem in which the process of information arrival is subjective. By studying preferences over menus of acts, we derive a sequence of utility representations that captures the decision maker’s uncertainty about the beliefs he will hold...
Persistent link: https://www.econbiz.de/10009366834