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Almost Stochastic Dominance: Magnitude Constraints on Risk Aversion
(Private Enterprise Research Center, Texas A&M University, 2021-06-01)
Almost stochastic dominance (ASD) extends conventional first and second degree stochastic dominance by placing restrictions on the variability in the first and second derivatives of utility. Such restrictions increase the ...
Optimality of Winner-Take-All Contests: The Role of Attitudes Toward Risk
(Private Enterprise Research Center, Texas A&M University, 2019-12-16)
It has been established in the literature that, under the assumption of risk-neutral contestants, it is usually optimal for an effort maximizing contest organizer with a fixed prize budget to award everything to a single ...
Comparative Risk Apportionment
(Private Enterprise Research Center, Texas A&M University, 2021-01-04)
A decision maker who would rather apportion an independent risk in a state with a good lottery than in a state with a bad lottery is said to have a preference for risk apportionment (Eeckhoudt & Schlesinger, 2006). In this ...
Alternative Approaches to Comparative nth-Degree Risk Aversion
(Private Enterprise Research Center, Texas A&M University, 2018-07-30)
Economists have used the risk premium and the probability premium that are revealed through individual choices to compare how risk averse two individuals are. These behavioral, or choice-based, measures of risk aversion ...
Portfolio Choice in the Model of Expected Utility with a Safety-First Component
(Private Enterprise Research Center, Texas A&M University, 2020-10-14)
Whereas the majority of economists interpret risk as dispersion or variation in an outcome variable, many everyday decision makers tend to associate risk with the outcome failing to meet a certain “safety� level. In ...
Risk and Risk Aversion Effects in Contests with Contingent Payments
(Private Enterprise Research Center, Texas A&M University, 2017-03-01)
Contests by their very nature involve risk, winning and losing are both possible, and the gain from winning can itself be uncertain. The participants in a contest use resources to increase their chance of winning. The main ...