Probabilistic risk attitudes and local risk aversion: a paradox

Prominent theories of decision under risk that challenge expected utility theory model risk attitudes at least partly with transformation of probabilities. This paper shows how attributing local risk aversion to attitudes towards probabilities can produce extreme probability distortions that imply paradoxical risk aversion. Copyright Springer Science+Business Media New York 2014

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Year of publication:	2014
Authors:	Sadiraj, Vjollca
Published in:	Theory and Decision. - Springer. - Vol. 77.2014, 4, p. 443-454
Publisher:	Springer
Subject:	Risk aversion \| Probability transformation \| Calibration \| Reference dependence

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011154899