On the Contribution of the Markowitz Model of Utility to Explain Risky Choice in Experimental Research

Georgalos, Konstantinos and Paya, Ivan and Peel, David Alan (2018) On the Contribution of the Markowitz Model of Utility to Explain Risky Choice in Experimental Research. Journal of Economic Behavior and Organization. ISSN 0167-2681

[img]
Preview
PDF (JEBO_4472)
JEBO_4472.pdf - Accepted Version
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.

Download (315kB)

Abstract

It is becoming increasingly common to accept that heterogeneity of preferences is an appropriate approach to describe aggregate experimental data on risky choice. We propose a parametric form of utility consistent with Markowitz’s (1952) hypotheses as a useful model to consider. This value function exhibits the fourfold attitude to risk and can also capture different combinations of risk attitudes and higher-order preferences. Moreover, it can be combined with probability weighting functions as well as with other value functions as part of mixture models that capture heterogeneity of preferences. We employ data from three recent experimental studies and show that this model can contribute to the explanation of their findings.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Economic Behavior and Organization
Additional Information:
This is the author’s version of a work that was accepted for publication in Journal of Economic Behavior and Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior and Organization, ?, ?, 2019 DOI: 10.1016/j.jebo.2018.11.010
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
128982
Deposited By:
Deposited On:
15 Nov 2018 09:42
Refereed?:
Yes
Published?:
Published
Last Modified:
23 Sep 2020 04:47