Dillenberger, David (2008): Preferences for OneShot Resolution of Uncertainty and AllaisType Behavior.

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Abstract
Experimental evidence suggests that individuals are more risk averse when they perceive risk gradually. We address these findings by studying a decision maker (DM) who has recursive preferences over compound lotteries and who cares about the way uncertainty is resolved over time. DM has preferences for oneshot resolution of uncertainty if he always prefers any compound lottery to be resolved in a single stage. We establish an equivalence between dynamic preferences for oneshot resolution of uncertainty and static preferences that are identified with the behavior observed in Allaistype experiments. The implications of this equivalence on preferences over information systems are examined. We define the gradual resolution premium and demonstrate its magnifying effect when combined with the usual risk premium. In an intertemporal context, preferences for oneshot resolution of uncertainty capture narrow framing.
Item Type:  MPRA Paper 

Original Title:  Preferences for OneShot Resolution of Uncertainty and AllaisType Behavior 
Language:  English 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D80  General 
Item ID:  8342 
Depositing User:  David Dillenberger 
Date Deposited:  20 Apr 2008 05:34 
Last Modified:  01 Oct 2019 05:15 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/8342 