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Risk Aversion in Expected-Utility Theory by Vladimir Guimarães Farias Sodré is a document available to read on EtoBox.

What is Risk Aversion in Expected-Utility Theory about?

The document presents a theorem that calibrates the relationship between risk attitudes over small and large stakes within expected utility theory. The theorem shows that anything but virtual risk neutrality over modest stakes implies unrealistically high risk aversion over large stakes. It provides examples illustrating that if an expected utility maximizer turns down a small-stakes gamble, they must also turn down large-stakes gambles that most people would accept. This suggests expected utility theory ca

Author

Vladimir Guimarães Farias Sodré

Language

EN