Risk Aversion

Pavlo R. Blavatskyy

No 370, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Risk aversion is traditionally defined in the context of lotteries over monetary payoffs. This paper extends the notion of risk aversion to a more general setup where outcomes (consequences) may not be measurable in monetary terms and people may have fuzzy preferences over lotteries, i.e. they may choose in a probabilistic manner. The paper considers comparative risk aversion within neoclassical expected utility theory, a constant error/tremble model and a strong utility model of probabilistic choice (which includes the Fechner model and the Luce choice model as special cases). The paper also provides a new definition of relative riskiness of lotteries.

Keywords: Risk aversion; more risk averse than; riskiness; probabilistic choice; expected utility theory; Fechner model; Luce choice model (search for similar items in EconPapers)
JEL-codes: D00 D80 D81 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-cba, nep-cbe, nep-dcm and nep-upt
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:370

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