TY - JOUR
T1 - Risk aversion in the small and in the large
T2 - Calibration results for betweenness functionals
AU - Safra, Zvi
AU - Segal, Uzi
N1 - Funding Information:
We thank Larry Epstein, Aaron Fix, the editor, and a referee for their help and suggestions. Uzi Segal thanks the NSF for its financial support (Award #0617359).
PY - 2009/2
Y1 - 2009/2
N2 - A reasonable level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. This was demonstrated by Rabin (Econometrica 68:1281-1292, 2000) for expected utility theory. Later, Safra and Segal (Econometrica, 2008) extended this result by showing that similar arguments apply to many non-expected utility theories, provided they are Gâteaux differentiable. In this paper we drop the differentiability assumption and by restricting attention to betweenness theories we show that much weaker conditions are sufficient for the derivation of similar calibration results.
AB - A reasonable level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. This was demonstrated by Rabin (Econometrica 68:1281-1292, 2000) for expected utility theory. Later, Safra and Segal (Econometrica, 2008) extended this result by showing that similar arguments apply to many non-expected utility theories, provided they are Gâteaux differentiable. In this paper we drop the differentiability assumption and by restricting attention to betweenness theories we show that much weaker conditions are sufficient for the derivation of similar calibration results.
KW - Betweenness functionals
KW - Calibration results
KW - Risk aversion
UR - http://www.scopus.com/inward/record.url?scp=58549108391&partnerID=8YFLogxK
U2 - 10.1007/s11166-008-9057-6
DO - 10.1007/s11166-008-9057-6
M3 - ???researchoutput.researchoutputtypes.contributiontojournal.article???
AN - SCOPUS:58549108391
SN - 0895-5646
VL - 38
SP - 27
EP - 37
JO - Journal of Risk and Uncertainty
JF - Journal of Risk and Uncertainty
IS - 1
ER -