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Health values, preference inconsistency, and insurance demand

Wrede, Matthias - 2005

Several empirical studies provide evidence that their actual health state affects people's attitudes towards health and medical care in hypothetical health states. In the tradition of behavioural economics this paper considers the actual health state as a point of reference and builds a model...

Persistent link: https://www.econbiz.de/10010261396

Risk aversion, prospect theory, and strategic risk in law enforcement: Evidence from an antitrust experiment

Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloé; … - 2008

enforcement policies. First, we observe that risk aversion is negatively correlated with players' proclivity to form a cartel, and … leniency programs in deterring cartels is mostly due to the increased risk of a cartel member being cheated upon when entering … a collusive agreement, while the risk of a cartel being detected by an autonomous investigation of the Authority seems …

Persistent link: https://www.econbiz.de/10010281419

Probability weighting as evolutionary second-best

Herold, Florian; Netzer, Nick - 2010

The economic concept of the second-best involves the idea that multiple simultaneous deviations from a hypothetical first-best optimum may be optimal once the first-best itself can no longer be achieved, since one distortion may partially compensate for another. Within an evolutionary framework,...

Persistent link: https://www.econbiz.de/10010315583

Yesterday's expectation of tomorrow determines what you do today: the role of reference-dependent utility from expectations

Matthey, Astrid - 2008

The paper introduces the concept of adjustment utility, that is, referencedependent utility from expectations. It offers an explanation for observed preferences that cannot be explained with existing models, and yields new predictions for individual decision making. The model gives a simple...

Persistent link: https://www.econbiz.de/10010263858

An Outcome-Oriented Theory of Choice and Empirical Paradoxes in Expected Utility Theory

Kaneko, Fumihiro - 1997

I analyze observed choice between lotteries from an outcome-oriented point of view in the framework of choice between random variables. I characterize a choice maker, who faces a choice situation between lotteries, by (1) a surmising process that associates, with a pair of lotteries, a set of...

Persistent link: https://www.econbiz.de/10010369171

A Theory of Price Adjustment under Loss Aversion

Ahrens, Steffen; Pirschel, Inske; Snower, Dennis J. - 2014

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price...

Persistent link: https://www.econbiz.de/10010398564

Stochastic expected utility and prospect theory in a horse race: A finite mixture approach

Bruhin, Adrian - 2008

This study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the Allais paradox or the fourfold pattern of risk attitudes....

Persistent link: https://www.econbiz.de/10010315494

Consumption paths under prospect utility in an optimal growth model

Foellmi, Reto; Rosenblatt-Wisch, Rina; Schenk-Hoppé, … - 2010

This paper studies the Cass-Koopmans-Ramsey model of optimal economic growth in the presence of loss aversion and habit formation. The representative agent's preferences for consumption can be gradually varied between the standard constant intertemporal elasticity of substitution (CIES) case and...

Persistent link: https://www.econbiz.de/10010316035

Poverty and welfare measurement on the basis of prospect theory

Jäntti, Markus; Kanbur, Ravi; Nyyssölä, Milla; … - 2012

This paper examines the measurement of social welfare, poverty and inequality taking into account features that have been found to be important welfare determinants in behavioural economics. Most notably, we incorporate reference-dependence, loss aversion and diminishing sensitivity - aspects...

Persistent link: https://www.econbiz.de/10010319772

Investors Facing Risk II: Loss Aversion and Wealth Allocation When Utility Is Derived From Consumption and Narrowly Framed Financial Investments

Rengifo, Erick W.; Trifan, Emanuela - 2007

This paper studies the attitude of non-professional investors towards financial losses and their decisions concerning wealth allocation among consumption, risky, and risk-free financial assets. We employ a two-dimensional utility setting in which both consumption and financial wealth...

Persistent link: https://www.econbiz.de/10010266877