Decisions under unpredictable losses: An examination of the restated diversification principle

Ali M. Ahmed

Judgment and Decision Making, 2007, vol. 2, issue 5, 312-316

Abstract: An experimental test of the descriptive adequacy of the restated diversification principle is presented. The principle postulates that risk-averse utility maximizers will pool risks for their mutual benefit, even if information is missing about the probabilities of losses. It is enough for people to assume that they face equal risks when they pool risks. The results of the experiment support the principle.

Date: 2007
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