On the Impossibility of Protecting Risk-takers

• 成果类型: Article
• 署名作者: Hinnosaar, Toomas
• 署名单位: Collegio Carlo Alberto
• 刊物名称: ECONOMIC JOURNAL
• ISSN/ISSBN: 0013-0133
• DOI: 10.1111/ecoj.12446
• 发表日期: 2018
• 页码: 1531-1544
• 关键词: PROSPECT-THEORY; Optimal auctions; averse buyers; DESIGN; preferences; MODEL

摘要

Risk-neutral sellers can extract high profits from risk-loving buyers using lotteries. To limit risk-taking, gambling is heavily regulated in most countries. In this article, I show that protecting risk-loving buyers is essentially impossible. Even if sellers are restricted from using mechanisms that resemble lotteries, they can still construct selling mechanisms that ensure unbounded profits as long as buyers are risk-loving, at least asymptotically. Asymptotically risk-loving preferences are both sufficient and necessary for unbounded profits. Buyers are asymptotically risk-loving, for example, when they are globally risk-loving, when they have cumulative prospect theory preferences, or when their utility is bounded from below.