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Instituto Superior de Economia e Gestão (ISEG)


SEMINÁRIO ISEG 2S | Random Choice Under Risk

Em 19-05-2014 às 14:00 / Quelhas 6 | Piso 3 | Room Delta


» Click here to visit the ISEG 2S webpage and view the complete programme for the Seminar Series.

Miguel A. Ballester - Universitat Autònoma de Barcelona

Random Choice Under Risk


In this paper we study the compatibility of stochastic models of choice with the expected utility treatment of individual risk aversion. We start by showing that the stochastic counterpart of the classical notion of `being more risk averse than' is not feasible if expected utility is used. Furthermore, this negative result is pervasive, it is present everywhere and leads to substantial problems of identification and interpretation of risk parameters in empirical applications. But we also bring positive results. We show that a simple and natural transformation of utilities, the certainty equivalent representation, is free from this problem. Motivated by this positive result, in the last part of the paper we provide axiomatic foundations for the classical stochastic Luce model that uses the certainty equivalent transformation.

Organizing Team
This seminars series is organized by Joana Pais (ECO), Raquel M. Gaspar (FIN/MG) and Isabel Proença (QM).

Meeting the Speaker
All speakers are available to meet faculty at ISEG before the talk. Slots are limited. To book your time with the speaker, contact one of the coordination team members.

Mailing list
To join the ISEG 2S Seminar Mailing List and receive regular information contact Filomena Ferreira.

If you come to the seminars at ISEG by car, please contact Filomena Ferreira to assure your entrance into the park.