Risk attitudes in axiomatic decision theory: a conceptual perspective
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In this paper, I examine the decision-theoretic status of risk attitudes. I start by providing evidence showing that the risk attitude concepts do not play a major role in the axiomatic analysis of the classic models of decision-making under risk. This can be interpreted as reflecting the neutrality of these models between the possible risk attitudes. My central claim, however, is that such neutrality needs to be qualified and the axiomatic relevance of risk attitudes needs to be re-evaluated accordingly. Specifically, I highlight the importance of the conditional variation and the strengthening of risk attitudes, and I explain why they establish the axiomatic significance of the risk attitude concepts. I also present several questions for future research regarding the strengthening of risk attitudes.
KeywordsRisk aversion Conditional certainty equivalent Allais paradox Non-expected utility Rank-dependent utility Cautious expected utility
For helpful comments or discussions, I am thankful to two reviewers, Mohammed Abdellaoui, Richard Bradley, Michèle Cohen, Mikaël Cozic, Eric Danan, David Dillenberger, Louis Eeckhoudt, Raphaël Giraud, Philippe Mongin, Pietro Ortoleva, and Fanyin Zheng. All errors and omissions are mine. Research for this paper was funded by the Ecole Normale Supérieure-Ulm, the Université Cergy-Pontoise, and the Wagemann Foundation.
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