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- Title
Loss aversion.
- Authors
Blavatskyy, Pavlo
- Abstract
Loss aversion is traditionally defined in the context of lotteries over monetary payoffs. This paper extends the notion of loss aversion to a more general setup where outcomes (consequences) may not be measurable in monetary terms and people may have fuzzy preferences over lotteries, i.e., they may choose in a probabilistic manner. The implications of loss aversion are discussed for expected utility theory and rank-dependent utility theory as well as for popular models of probabilistic choice such as the constant error/tremble model and a strong utility model (that includes the Fechner model of random errors and Luce choice model as special cases).
- Subjects
LOSS aversion; LOTTERIES; BRIBERY; FUZZY measure theory; UTILITY theory; ERRORS; ECONOMIC models
- Publication
Economic Theory, 2011, Vol 46, Issue 1, p127
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-009-0504-7