Asymmetric loss utility: an analysis of decision under risk

Alex Strashny

Game Theory and Information from University Library of Munich, Germany

Abstract: This paper develops a utility model for evaluating lotteries. In estimating utility, risk averse people use an asymmetric loss function. Expected utility is seen as a special case that is a good approximation in some cases. The model resolves several paradoxes and makes easily falsifiable predictions. When used in hypothesis testing, the model allows researchers to directly specify their attitudes toward risk.

Keywords: choice under uncertainty; non-expected utility theory; risk aversion; Allais paradox; Ellsberg paradox; St. Petersburg paradox; equity premium puzzle; decision theory (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-01-29
New Economics Papers: this item is included in nep-rmg
Note: Type of Document - pdf / TeX; prepared on Win; pages: 21; figures: 3
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:0401006

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