Wilcox, Nathaniel
(2007):
*Stochastically more risk averse: A contextual theory of stochastic discrete choice under risk.*

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## Abstract

Microeconometric treatments of discrete choice under risk are typically homoscedastic latent variable models. Specifically, choice probabilities are given by preference functional differences (given by expected utility, rank-dependent utility, etc.) embedded in cumulative distribution functions. This approach has a problem: Estimated utility function parameters meant to represent agents’ degree of risk aversion in the sense of Pratt (1964) do not imply a suggested “stochastically more risk averse” relation within such models. A new heteroscedastic model called “contextual utility” remedies this, and estimates in one data set suggest it explains (and especially predicts) as well or better than other stochastic models.

Item Type: | MPRA Paper |
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Original Title: | Stochastically more risk averse: A contextual theory of stochastic discrete choice under risk |

Language: | English |

Keywords: | risk; more risk averse; discrete choice; stochastic choice; heteroscedasticity |

Subjects: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C25 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions ; Probabilities C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior |

Item ID: | 11851 |

Depositing User: | Nathaniel Wilcox |

Date Deposited: | 02 Dec 2008 06:33 |

Last Modified: | 27 Sep 2019 13:07 |

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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/11851 |