Publication: Probability and risk: Foundations and economicimplications of probability-dependent risk preferences
Probability and risk: Foundations and economicimplications of probability-dependent risk preferences
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Fehr-Duda, H., & Epper, T. (2012). Probability and risk: Foundations and economicimplications of probability-dependent risk preferences. Annual Review of Economics, 4, 567–593. https://doi.org/10.1146/annurev-economics-080511-110950
Abstract
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Probability weighting has been largely ignored by economics despite abundant evidence that riskattitudes are in fact probability dependent. Probability weighting, however, provides a unifyingaccount of many real-world phenomena that are diffcult to reconcile with expected utility theory,such as the equity premium puzzle, the long-shot bias in betting markets, households'underdiversification and their willingness to buy small-scale insurance at exorbitant prices. Recentfindings suggest that probability dependence is not just a feature
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- Fehr-Duda, Helga
- Epper, Thomas
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Citations
Fehr-Duda, H., & Epper, T. (2012). Probability and risk: Foundations and economicimplications of probability-dependent risk preferences. Annual Review of Economics, 4, 567–593. https://doi.org/10.1146/annurev-economics-080511-110950
