The Large Number of Incompatible Choices Implied by Representing Risk Through Curvature
Speaker: A/Prof Ned Augenblick
Affiliation: University of California, Berkeley
Location: Room 629, Level 6, Colin Clark Building (#39), UQ St Lucia Campus
Online via Zoom: https://uqz.zoom.us/j/87897991126
Abstract
This paper aims to better understand the testable predictions of representing risk preferences through the curvature of a function. Our core insight is that certain sets of decisions that imply different curvature are incompatible and cannot be jointly represented by the same function. For example, it is incompatible for a person to be consistently risk-adverse in one decision while being consistently risk-seeking in another. We explore how this simple insight places a large amount of structure on allowable decisions. Furthermore, we show how this structure connects preferences over all types of lottery choices. We start with the most predominant theory of risk preferences in Economics, Expected Utility Theory (EUT), and then discuss how our results generalize to other theories that represent risk through curvature (such as Prospect Theory).
About the presenter's meeting
If you would like to meet with A/Prof Ned Augenblick, please contact Dr Zachary Breig
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