Risk aversion in cumulative prospect theory

• 成果类型: Article
• 署名作者: Schmidt, Ulrich; Zank, Horst
• 署名单位: University of Kiel; Leibniz Association; Institut fur Weltwirtschaft an der Universitat Kiel (IFW); University of Manchester
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1070.0762
• 发表日期: 2008
• 页码: 208-216
• 关键词: Cumulative prospect theory; loss aversion; risk aversion; Second-order stochastic dominance; decision analysis theory; RISK

摘要

This paper characterizes the conditions for strong risk aversion and second-order stochastic dominance for cumulative prospect theory. Strong risk aversion implies a convex weighting function for gains and a concave one for losses. It does not necessarily imply a concave utility function. The latter does follow if the weighting functions are continuous. By investigating the exact relationship between loss aversion and strong risk aversion, a natural index for the degree of loss aversion is derived.