This article obtains demand functions for risky assets without making a priori assumptions about the form of the utility function. In a simple portfolio model, the envelope theorem is applied to the indirect expected utility function to derive estimating equations. Tests for the existence of...

Choice is viewed as a derived, not a primitive, concept. Individual gambles are assigned subjective certainty equivalents the choice set "X" has an associated reference level [RL("X")] based on the certainty equivalents of its members; the outcomes of each gamble are recoded as deviations from...

Two insurance experiments using real-money consequences and multiple rounds to provide experience are described. In the first experiment, subjects bid for insurance to prevent a fixed loss of $4 at probabilities ranging from .01 to .9. Mean bids were near expected value except at the lowest...

The concept of risk-taking is examined from various perspectives: economic, decision theoretic, and psychological. Multiple factors are discussed.as complicating the extraction of any presumed risk-taking propensity from a person's real world behavior. Problem structuring, beliefs, and values...

Kunreuther, Meszaros, and Hogarth (1993) argue that insurers are risk averse and ambiguity averse, and that they use cognitive reference points and constraints in making pricing decisions. They further claim that insurer ambiguity may be a factor that has a role in market failure at the industry...

This article studies an agent's valuation of the right to trade in a complete contingent claims market. The proposed measure generalizes the Pratt(1964) risk premium, which captures the willingness to pay to replace a given risky wealth prospect with an actuarially equivalent, nonrisky wealth....

Wakker (1991) and Puppe (1990) point out a mistake in theorem 1 in Segal (1989). This theorem deals with representing preference relations over lotteries by the measure of their epigraphs. An error in the theorem is that it gives wrong conditions concerning the continuity of the measure. This...

This article identifies a lottery pricing anomaly, which I call the "r=x" anomaly," that is present in past pricing experiments--namely, a tendency for subjects to announce that their minimum selling price for some binary lottery is the greater of the two lottery prizes. The study shows that the...

When risk analysts and others refer to the "true" probability of an event, it is not easy to give it a meaning which is sound and useful as a communication device for regulatory, research planning, and related purposes. An interpretation is herein offered which, unlike Bayesian probability, is...