Rethinking Risk: Aspiration as Pure Risk
نویسندگان
چکیده
There exists no satisfactory theory of risk in current normative decision theories. Notions based on utility curvature, loss aversion and probability weighting are derivative, cannot be applied to nonnumerical consequences, and are not psychologically intuitive. I develop Pure Risk theory which resolves these problems – it is consistent with existing normative theories, and both internalises and generalises the intuitive notion of risk being related to the probability of not achieving one’s aspirations. The theory shows that existing models are misspeci...ed. E¤ects hitherto modelled as loss aversion or utility curvature may be due instead to Pure Risk.
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