This preview shows page 1. Sign up to view the full content.
Unformatted text preview: real life agents utility functions. The practice of estimating an eco-nomic agents risk aversion parameters for small lotteries might lead to misleading conclusions if such estimates are used to characterize the decision makers preferences regarding lotteries over large sums. Bibliographic Notes Recommended readings : Kreps 1990, 8198; Mas-Colell et al. 1995, Chapter 6, CD. The measures of risk aversion are taken from Arrow (1970) and Pratt (1964). or the psychological literature discussed here, see Kahneman and Tversky (1979) and Kahneman and Tversky (2000). The St. Petersburg Paradox was suggested by Daniel Bernoulli in 1738 (see Bernoulli 1954). The notion of stochastic domination was introduced into the economic literature by Rothschild and Stiglitz (1970). Rabins argument is based on Rabin (2000)....
View Full Document
This note was uploaded on 12/29/2011 for the course ECO 443 taught by Professor Aswa during the Fall '10 term at SUNY Stony Brook.
- Fall '10