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来源类型 | Discussion paper |
规范类型 | 论文 |
来源ID | DP11929 |
DP11929 Risk Aversion as a Perceptual Bias | |
Michael Woodford | |
发表日期 | 2017-03-22 |
出版年 | 2017 |
语种 | 英语 |
摘要 | The theory of expected utility maximization (EUM) explains risk aversion as due to diminishing marginal utility of wealth. However, observed choices between risky lotteries are difficult to reconcile with EUM: for example, in the laboratory, subjects' responses on individual trials involve a random element, and cannot be predicted purely from the terms offered; and subjects often appear to be too risk averse with regard to small gambles (while still accepting sufficiently favorable large gambles) to be consistent with any utility-of-wealth function. We propose a unified explanation for both anomalies, similar to the explanation given for related phenomena in the case of perceptual judgments: they result from judgments based on imprecise (and noisy) mental representation of the decision situation. In this model, risk aversion is predicted without any need for a nonlinear utility-of-wealth function, and instead results from a sort of perceptual bias --- but one that represents an optimal Bayesian decision, given the limitations of the mental representation of the situation. We propose a specific quantitative model of the mental representation of a simple lottery choice problem, based on other evidence regarding numerical cognition, and test its ability to explain the choice frequencies that we observe in a laboratory experiment. |
主题 | Monetary Economics and Fluctuations |
关键词 | Weber's law Diminishing sensitivity Bayesian decision theory Prospect theory Rabin critique |
URL | https://cepr.org/publications/dp11929 |
来源智库 | Centre for Economic Policy Research (United Kingdom) |
资源类型 | 智库出版物 |
条目标识符 | http://119.78.100.153/handle/2XGU8XDN/540741 |
推荐引用方式 GB/T 7714 | Michael Woodford. DP11929 Risk Aversion as a Perceptual Bias. 2017. |
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