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Learning and risk aversion

Carlos Oyarzun and Rajiv Sarin

Journal of Economic Theory, 2013, vol. 148, issue 1, 196-225

Abstract: We study how learning shapes behavior towards risk when individuals are not assumed to know, or to have beliefs about, probability distributions. In any period, the behavior change induced by learning is assumed to depend on the action chosen and the payoff obtained. We characterize learning processes that, in expected value, increase the probability of choosing the safest actions and provide sufficient conditions for them to converge to the choices of risk averse expected utility maximizers. We provide a learning theoretic motivation for long run risk choices, such as those in expected utility theory with known payoff distributions.

Keywords: Reinforcement learning; Risk aversion; Expected utility (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: Learning and Risk Aversion (2012) Downloads
Working Paper: Learning and Risk Aversion (2005) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:148:y:2013:i:1:p:196-225

DOI: 10.1016/j.jet.2012.09.011

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