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

Games and Economic Behavior

Volumn 56, Issue 1, 2006, Pages 45-60

  Cox, James C ^a,b   Sadiraj, Vjollca ^a,c  

^a UNIVERSITY OF ARIZONA   (United States)

^b INDIANA UNIVERSITY   (United States)

^c UNIVERSITY OF AMSTERDAM   (Netherlands)

Author keywords

Concavity calibration; Expected utility theory; Prospect theory; Risk aversion

Indexed keywords

EID: 33646771384     PISSN: 08998256     EISSN: 10902473     Source Type: Journal    
DOI: 10.1016/j.geb.2005.08.001     Document Type: Article

References (27)

1. Arrow K. Essays in the Theory of Risk-Bearing (1971), Markham, Chicago
2. Camerer C., and Thaler R.H. In honor of Matthew Rabin: Winner of the John Bates Clark medal. J. Econ. Perspect. 17 (2003) 159-176
3. Cox, J.C., Sadiraj, V., 2001. Risk aversion and expected utility theory: Coherence for small- and large-stakes gambles. Working Paper 01-03. Department of Economics, University of Arizona
4. Cox J.C., Smith V.L., and Walker J.M. Auction market theory of heterogeneous bidders. Econ. Letters 9 (1982) 319-325
5. Gonzales R., and Wu G. On the shape of the probability weighting function. Cogn. Psychol. 38 (1999) 129-166
6. Harris M., and Raviv A. Allocation mechanisms and the design of auctions. Econometrica 49 (1981) 1477-1499
7. Holt Jr. C.A. Competitive bidding for contracts under alternative auction procedures. J. Polit. Economy 88 (1980) 433-445
8. Kahneman D. A psychological perspective on economics. Amer. Econ. Rev. Pap. Proc. 93 (2003) 162-168
9. Kahneman D., and Tversky A. Prospect theory: An analysis of decision under risk. Econometrica 47 (1979) 263-292
10. Luce R.D., and Raiffa H. Games and Decisions (1957), Wiley, New York
11. Maskin E., and Riley R. Optimal auctions with risk averse buyers. Econometrica 52 (1984) 1473-1518
12. Matthews S.A. Selling to risk averse buyers with unobservable tastes. J. Econ. Theory 30 (1983) 370-400
13. Milgrom P.R., and Weber R.J. A theory of auctions and competitive bidding. Econometrica 50 (1982) 1089-1122
14. Moore J. Global incentive constraints in auction design. Econometrica 52 (1984) 1523-1536
15. Palacios-Huerta, I., Serrano, R., Volij, O., 2003. Rejecting small gambles under expected utility. Working paper. Brown University
16. Pratt J.W. Risk aversion in the small and in the large. Econometrica 32 (1964) 122-136
17. Rabin M. Risk aversion and expected utility theory: A calibration theorem. Econometrica 68 (2000) 1281-1292
18. Rabin M., and Thaler R.H. Anomalies: Risk aversion. J. Econ. Perspect. 15 (2001) 219-232
19. Riley J.G., and Samuelson W.F. Optimal auctions. Amer. Econ. Rev. 71 (1981) 381-392
20. Royal Swedish Academy of Sciences, 2002. Foundations of behavioral and experimental economics: Daniel Kahneman and Vernon Smith. Advanced Information on the Prize in Economic Sciences (17 December) 1-25
21. Rubinstein, A., 2001. Comments on the Risk and Time Preferences in Economics. Working paper. Tel Aviv University
22. Rubinstein, A., 2004. Dilemmas of an economic theorist. Presidential Address. Econometric Society
23. The Economist, 2001. Economics focus: Averse to reality (August 11) 61
24. Tversky A., and Kahneman D. Advances in prospect theory: Cumulative representation of uncertainty. J. Risk Uncertainty 5 (1992) 297-323
25. Vickrey W. Counterspeculation, auctions, and competitive sealed tenders. J. Finance 16 (1961) 8-37
26. von Neumann J., and Morgenstern O. Theory of Games and Economic Behavior (1947), Princeton Univ. Press, Princeton, NJ
27. Yaari M.E. The dual theory of choice under risk. Econometrica 55 (1987) 95-115