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The standard model of rational risky decision-making

Falahati, Kazem - In: Journal of risk and financial management : JRFM 14 (2021) 4, pp. 1-22

Expected utility theory (EUT) is currently the standard framework which formally defines rational decision-making under risky conditions. EUT uses a theoretical device called von Neumann-Morgenstern utility function, where concepts of function and random variable are employed in their...

Persistent link: https://www.econbiz.de/10012520657

Rationality and choices in economics: behavioral and evolutionary approaches

Graziano, Mario; Schilirò, Daniele - Volkswirtschaftliche Fakultät, … - 2012

The paper critically discusses the issue of rationality and choices in economics in both the behavioural and … the analysis of economic choices, showing the limits of rationality. On the other hand, the work offers a reinterpretation … single and undifferentiated thought, locked into the idea of perfect rationality, but, on the opposite, is a discipline that …

Persistent link: https://www.econbiz.de/10009418485

RATIONALITY AND CHOICES IN ECONOMICS: BEHAVIORAL AND EVOLUTIONARY APPROACHES

GRAZIANO, Mario; SCHILIRO, Daniele - In: Theoretical and Practical Research in Economic Fields II (2011) 2, pp. 183-196

Persistent link: https://www.econbiz.de/10009653234

Limited attention in case-based belief formations

Bleile, Jörg - 2014

An agent wants to derive her belief over outcomes based on past observations collected in her database (memory). There is well establish evidence in the psychology and marketing literature that agents consistently fail (or choose not) to process all available information. An agent might be...

Persistent link: https://www.econbiz.de/10010403098

Rational After All : Toward an Improved Theory of Rationality in Economics

Foka-Kavalieraki, Yulie; Hatzis, Aristides N. - 2011

rationality or if they constitute rational responses to the scarcity of information, time and energy. In our discussion we will … important related policy question: when rationality seems to fail, does this necessarily imply that agents should be …

Persistent link: https://www.econbiz.de/10014190167

Risk aversion in medical decision making: a survey

Chicaíza, Liliana; García, Mario; Romano, Giancarlo - In: Lecturas de Economía (2011) 75, pp. 163-185

This article surveys the literature on risk aversion in medical decision making. The search covered Econlit, Jstor Science Direct and Springer Link since 1985. The results are classified in three topics: Risk aversion in the frameworks of Expected Utility and Rank Dependent Expected Utility...

Persistent link: https://www.econbiz.de/10010902342

The nature of risk preferences: Evidence from insurance choices

Barseghyan, Levon; Molinari, Francesca; O'Donoghue, Ted; … - 2011

We use data on households' deductible choices in auto and home insurance to estimate a structural model of risky choice that incorporates standard risk aversion (concave utility over final wealth), loss aversion, and nonlinear probability weighting. Our estimates indicate that nonlinear...

Persistent link: https://www.econbiz.de/10010292086

Up close it feels dangerous: 'anxiety' in the face of risk

Eisenbach, Thomas M.; Schmalz, Martin C. - 2013

Motivated by individuals' emotional response to risk at different time horizons, we model an 'anxious' agent - one who is more risk averse with respect to imminent risks than distant risks. Such preferences describe well-documented features of 1) individual behavior, 2) equilibrium prices, and...

Persistent link: https://www.econbiz.de/10010333590

Expectation-based loss aversion and strategic interaction

Dato, Simon; Grunewald, Andreas; Müller, Daniel - 2015

This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Koszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to...

Persistent link: https://www.econbiz.de/10011430524

Optimal Stopping with General Risk Preferences

Duraj, Jetlir - 2020

We give a full characterization of the continuation and stopping regions of optimal stopping of diffusions. We consider separately the case of a naive agent who is unaware of the possible time inconsistency in her behavior and the case of a sophisticated agent who is fully aware of such an...

Persistent link: https://www.econbiz.de/10012854784