This paper explores the differences in observed risk propensity among petroleum firms and their impact on firm performance. In this work, we (1) develop a decision theoretic model which measures a firm's risk propensity in the form of an "implied" utility function; (2) investigate changes in...

In selecting the preferred course of action, decision makers are often uncertain about one or more probabilities of interest. The experimental literature has ascertained that this uncertainty (ambiguity) might affect decision makers’ preferences. Then, the decision maker might wish to...

Adequate funding of occupational pension plans is key to benefit security. Across countries different methods of securing funding exist: solvency requirements, a pension guarantee fund, and sponsor support. The key goal of this paper is to investigate the welfare implications to the beneficiary...

A random variable (RV) X is given aminimum selling price $$S_U \left( X \right):=\mathop {\sup }\limits_x \left\{ {x + EU\left( {X - x} \right)} \right\}$$ and amaximum buying price $$B_p \left( X \right):=\mathop {\inf }\limits_x \left\{ {x + EP\left( {X - x} \right)} \right\}$$ whereU(·)...

A random variable (RV) X is given aminimum selling price <Equation ID="E1"> <EquationSource Format="TEX"> $$S_U \left( X \right):=\mathop {\sup }\limits_x \left\{ {x + EU\left( {X - x} \right)} \right\}$$ </EquationSource> </Equation> and amaximum buying price <Equation ID="E2"> <EquationSource Format="TEX"> $$B_p \left( X \right):=\mathop {\inf }\limits_x \left\{ {x + EP\left( {X - x} \right)} \right\}$$ </EquationSource> </Equation>...</equationsource></equation></equationsource></equation>

Numerous studies have shown that compensation demanded (CD) to give up a commodity often greatly exceeds willingness to pay (WTP) to obtain the same commodity, even in incentive compatible experiments that penalize strategic misrepresentation. Observed CD/WTP disparities are too large to be...

This paper relates recursive utility in continuous time to its discrete-time origins and provides a rigorous and intuitive alternative to a heuristic approach presented in [Duffie, Epstein 1992], who formally define recursive utility in continuous time via backward stochastic differential...

This paper introduces a new method of estimating indifference curves in the Marschak-Machina triangle. The method involves posing questions about indifference. Contrary to previous attempts, where subjects were required to identify those lotteries to which they were indifferent vis-à-vis a...

In this paperwe relate individual risk attitude as elicited by binary lotteries and certainty equivalents to market behavior. By analyzing 26 independent markets with a total of 280 participants we show that binary lottery choices and certainty equivalents are pootly correlated. Only lottery...