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Risk aversion for losses and the Nash bargaining solution

Hans Peters

Theory and Decision, 2022, vol. 92, issue 3, No 14, 703-715

Abstract: Abstract We call a decision maker risk averse for losses if that decision maker is risk averse with respect to lotteries having alternatives below a given reference alternative in their support. A two-person bargaining solution is called invariant under risk aversion for losses if the assigned outcome does not change after correcting for risk aversion for losses with this outcome as pair of reference levels, provided that the disagreement point only changes proportionally. We present an axiomatic characterization of the Nash bargaining solution based on this condition, and we also provide a decision-theoretic characterization of the concept of risk aversion for losses.

Keywords: Risk aversion; Loss aversion; Risk aversion for losses; Nash bargaining (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11238-021-09837-w

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