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Calibration Results for Non-Expected Utility Theories

Authors

  • Zvi Safra,

    1. The College of Management and Tel Aviv University, Israel; safraz@tau.ac.il
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  • Uzi Segal

    1. Dept. of Economics, Boston College, 21 Campanella Way, Chestnut Hill, MA 02467-3806, U.S.A.; segalu@bc.edu
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    • We thank Larry Epstein, Simon Grant, Eran Hanany, Edi Karni, Mark Machina, Matthew Rabin, Ariel Rubinstein, Shunming Zhang, three referees, and especially Eddie Dekel for their suggestions. Zvi Safra thanks the Israel Institute of Business Research and Uzi Segal thanks the NSF for financial support (Award #0617359).

Abstract

Rabin (2000) proved that a low level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. Rabin's arguments strongly depend on expected utility theory, but we show that similar arguments apply to general non-expected utility theories.

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Article Information

DOI

10.3982/ECTA6175

Format Available

Full text: PDF

© 2008 The Econometric Society

Keywords

  • Risk aversion;
  • calibration;
  • non-expected utility theories

Publication History

  • Issue online:
  • Version of record online:
  • Manuscript received November, 2005; final revision received March, 2008.

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