Cognitive Imprecision and Small-Stakes Risk Aversion

Risk Aversion and Expected-Utility Theory: Coherence for Small- and Large-Stakes Gambles

Small- and large-stakes risk aversion: Implications of concavity calibration for decision theory

A growing literature reports the conclusions that: (a) expected utility theory does not provide a plausible theory of risk aversion for both small-stakes and large-stakes gambles; and (b) this decision theory should be replaced with an alternative theory characterized by loss aversion. This paper explains that the arguments in previous literature fail to support these conclusions. Either concav...

Rational Behaviour, Risk Aversion High Stakes for Society

1 My thanks to Serge Pahaut for our many fruitful discussions together over the past few years. Nathalie Picard and Jean Picard submitted useful suggestions for improving the quality and readability of this paper. Lastly, Kurt van Dender also helped me to improve its presentation.

Cognitive Load Increases Risk Aversion

We investigate how stable individuals’ risk attitudes are with respect to changes in cognitive load. In a laboratory experiment using pairwise lottery choice and a within-subject design, we show that putting subjects under load via a concurrent working-memory task significantly increases their risk aversion. Subjects made significantly faster choices under load. Regardless of load, they respond...

Inequality aversion and risk aversion

This note shows that for two inequality averse social welfare functions, if one is more inequality averse than the other, the household preference induced by optimally allocating aggregate bundles according to this social welfare function is more risk averse than the other. We present examples showing that this comparative static can be reversed if inequality aversion is dropped. We show that t...