Pure Risk

David Dillenberger () and Jay Lu ()
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David Dillenberger: University of Pennsylvania
Jay Lu: University of California, Los Angeles

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We introduce a behavioral notion of domain-specific risk aversion that separates attitudes toward risk from deterministic utility: an agent is more pure risk averse in one domain than in another if, for prizes that are indifferent under certainty, he is more averse to risk in the former domain than in the latter. We develop a model that goes beyond expected utility by allowing risk attitudes to vary across domains, while preserving expected utility within each domain. The domains are subjective and need not be specified in advance; they are identified from choice behavior. We establish uniqueness of the model’s parameters and provide an axiomatic characterization.

Keywords: domain-specific risk aversion; non-expected utility; subjective domains; prize interchangeability (search for similar items in EconPapers)
JEL-codes: D80 D81 D91 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2026
New Economics Papers: this item is included in nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:26-011

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