The expected utility hypothesis is one of the building blocks of classical economic theory and founded on Savage's Sure-Thing Principle. It has been put forward, e.g. by situations such as the Allais and Ellsberg paradoxes, that real-life situations can violate Savage's Sure-Thing Principle and...

In this paper we analyse the empirical performance of several preference functionals using individual and group data. Our investigation aims to address two fundamental questions that have, until now, not been addressed in literature. Specifically, we intend to assess if there exists a risky...

In recent years the financial markets known a rapid development and become more and more complex. So, many regulatory requirements, focused on banks as well as insurance sector, have been developed. These regulatory are concentrated essentially on business risk control and required capital to...

In this paper I consider a portfolio optimization problem where an agent holds an endowment of stock and is allowed to buy some quantity of a put option on the stock. This basic question (how much insurance to buy?) has been addressed in insurance economics through the literature on rational...

The paper addresses a basic model of moral hazard (risk) [Gibbons, 2010; Gibbons, 2005] and suggests some of its modifications. In the basic model of moral risk, questions are put and examined that have not been considered in the previous researches. In particular, it is proved that the level of...

This article hopes to facilitate dialogue within political studies by presenting a general description of the conceptual structure of Rational Choice Theory, RCT. The main goal is to present precisely and concretely the basic precepts of RCT both on its original formulation and on the...

This article extends the theory of corporate risk management to encompass highly dynamic risks. Taking Viscusi'�s (1989) prospective reference from the context of individual decision making and applying it to a corporate context we propose a theory of how corporations process new information....

It has been accepted for over 270 years that the expected monetary value (EMV)of the St Petersburg game is infinite. Accepting this leads to a paradox; no reasonable person is prepared to pay the predicted large sum to play the game but will only pay, comparatively speaking, a very moderate...

This paper examines some of the consequences for economic theory of the replacement of binary personal preferences by non-binary personal preferences in an Arrow-Debreu society as in Debreu (1959), and reaches the conclusion that there is both much damage to existing theory and greater...