Define the riskiness of a gamble as the reciprocal of the absolute risk aversion (ARA) of an individual with constant ARA who is indifferent between taking and not taking that gamble. We characterize this index by axioms, chief among them a “duality” axiom which, roughly speaking, asserts...

This paper introduces and investigates the concept of repetitive risk aversion. The risk aversion of an increasing and concave utility function is repetitive if the fear of ruin, which measures agent's aversion to risking his entire income, is also increasing and concave. This is shown to be...

Shane Frederick's recent paper in the Journal of Economic Perspectives reported some extremely surprising results - even allowing for everything we've learned about risk aversion and innumeracy. A survey that produced very different results raises further questions about (a) the exact role of...

We propose a reasonable condition, which we call repetitive risk aversion, to be imposed on any utility function to account for the observed data on the relationship between the degree of absolute risk aversion and wealth. This condition is shown to be equivalent to the behaviorally meaningful...

Using a theoretical extension of the Friedman and Savage (1948) utility function developed in Bhattacharyya (2003), we predict that for financial assets with negative expected returns, expected return will be a declining and convex function of skewness. Using a sample of U.S. state lottery...

We axiomatize a subjective version of the recursive expected utility model. This development extends the seminal results of Kreps and Porteus (1978) to a subjective framework and provides foundations that are easy to relate to axioms familiar from timeless models of decision making under...

Ambiguity-aversion is a person's rational attitude towards the indeterminacy of the probability that attaches to his future prospects, both favorable and unfavorable. An ambiguity-averse person increases the probability of the unfavorable prospect, which is what criminal defendants typically do...