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John Leahy - One of the best experts on this subject based on the ideXlab platform.
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psychological Expected Utility Theory and anticipatory feelings
Quarterly Journal of Economics, 2001Co-Authors: Andrew Caplin, John LeahyAbstract:We extend Expected Utility Theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty. We show how these anticipatory feelings may result in time inconsistency. We provide an example from portfolio Theory to illustrate the potential impact of anticipation on asset prices.
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Psychological Expected Utility Theory and Anticipatory Feelings
1997Co-Authors: Andrew Caplin, John LeahyAbstract:We extend Expected Utility Theory to situations in which the prizes incloude feelings about living with uncertainty. We provide two examples to show the impact of these anticipatory feelings on decision making.
Matthew Rabin - One of the best experts on this subject based on the ideXlab platform.
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risk aversion and Expected Utility Theory a calibration theorem
Method and Hist of Econ Thought, 2001Co-Authors: Matthew RabinAbstract:Within the Expected-Utility framework, the only explanation for risk aversion is that the Utility function for wealth is concave: A person has lower marginal Utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing that Expected-Utility Theory is an utterly implausible explanation for appreciable risk aversion over modest stakes: Within Expected-Utility Theory, for any concave Utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. Illustrative calibrations are provided.
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risk aversion and Expected Utility Theory a calibration theorem
Econometrica, 2000Co-Authors: Matthew RabinAbstract:Within the Expected-Utility framework, the only explanation for risk aversion is that the Utility function for wealth is concave: A person has lower marginal Utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing that Expected-Utility Theory is an utterly implausible explanation for appreciable risk aversion over modest stakes: Within Expected-Utility Theory, for any concave Utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. Illustrative calibrations are provided. June 2000(This abstract was borrowed from another version of this item.)
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risk aversion and Expected Utility Theory a calibration theorem
Research Papers in Economics, 2000Co-Authors: Matthew RabinAbstract:Within the Expected-Utility framework, the only explanation for risk aversion is that the Utility function for wealth is concave: A person has lower marginal Utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing that Expected-Utility Theory is an utterly implausible explanation for appreciable risk aversion over modest stakes: Within Expected-Utility Theory, for any concave Utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. Illustrative calibrations are provided. June 2000
Francesco Trebbi - One of the best experts on this subject based on the ideXlab platform.
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risk aversion and Expected Utility Theory an experiment with large and small stakes
Journal of the European Economic Association, 2012Co-Authors: Matilde Bombardini, Francesco TrebbiAbstract:We employ a novel data set to estimate a structural econometric model of the decisions under risk of players in a game show where lotteries present payoffs in excess of half a million dollars. Differently from previous studies in the literature, the decisions under risk of the players in presence of large payoffs allow to estimate the parameters of the curvature of the vN-M Utility function not only locally but also globally. Our estimates of relative risk aversion indicate that a constant relative risk aversion parameter of about one captures the average of the sample population. In addition we find that individuals are practically risk neutral at small stakes and risk averse at large stakes, a necessary condition, according to Rabin (2000) calibration theorem, for Expected Utility to provide a unified account of individuals’ attitude towards risk. Finally, we show that for lotteries characterized by substantial stakes non-Expected Utility theories fit the data equally well as Expected Utility Theory.
S P Hoogendoorn - One of the best experts on this subject based on the ideXlab platform.
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Expected Utility Theory prospect Theory and regret Theory compared for prediction of route choice behavior
Transportation Research Record, 2011Co-Authors: Giselle De Moraes Ramos, Winnie Daamen, S P HoogendoornAbstract:Various decision theories have been used to explain travelers' behavior. This paper presents a comparative analysis from the points of view of Theory and application of the Expected Utility Theory, prospect Theory, and regret Theory. The application was based on an empirical data set on route choice behavior with and without information provision. Results show that despite the widespread use of Expected Utility Theory to model travelers' behavior, the use of prospect Theory is quite appropriate and promising, especially when information is provided. The reference point plays an important role in the prediction ability of prospect Theory. The greatest prediction ability occurs when the reference point is aligned with the observed behavior and thus reinforces the necessity of establishing appropriate and meaningful values. This study empirically shows the potential of alternatives to Expected Utility Theory to capture travelers' behavior better, as in the case of prospect Theory under the proposed model spe...
Andrew Caplin - One of the best experts on this subject based on the ideXlab platform.
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psychological Expected Utility Theory and anticipatory feelings
Quarterly Journal of Economics, 2001Co-Authors: Andrew Caplin, John LeahyAbstract:We extend Expected Utility Theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty. We show how these anticipatory feelings may result in time inconsistency. We provide an example from portfolio Theory to illustrate the potential impact of anticipation on asset prices.
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Psychological Expected Utility Theory and Anticipatory Feelings
1997Co-Authors: Andrew Caplin, John LeahyAbstract:We extend Expected Utility Theory to situations in which the prizes incloude feelings about living with uncertainty. We provide two examples to show the impact of these anticipatory feelings on decision making.
