Evolution of state-dependent risk preferences

Comparative Risk Aversion for State-Dependent Preferences

Asset Returns and State-Dependent Risk Preferences

We propose a consumption-based capital asset pricing model in which the representative agent’s preferences display state-dependent risk aversion. We obtain a valuation equation in which the vector of excess returns on equity includes both consumption risk as well as the risk associated with variations in preferences. We develop a simple model that can be estimated without specifying the functio...

State-Dependent Risk Preferences in Evolutionary Games

There is much empirical evidence that human decisionmaking under risk does not correspond the decision-theoretic notion of “rational” decision making, namely to make choices that maximize the expected value. An open question is how such behavior could have arisen evolutionarily. We believe that the answer to this question lies, at least in part, in the interplay between risk-taking and sequenti...

Evolution of Risk Preferences

This paper presents a simulation, made with a genetic algorithm (GA), in order to shape risk attitudes in a very simple environment of lotteries such as the Machina triangle. GA models the process of learning and imitation from successful traders in real world economics in a satisfactory way. An overlapping generations case is used where bankrupted agents exit the market and are replaced by new...

State Dependent Valuation: The Effect of Deprivation on Risk Preferences

The internal state of an organism affects its choices. Previous studies in various non-human animals have demonstrated a complex, and in some cases non-monotonic, interaction between internal state and risk preferences. Our aim was to examine the systematic effects of deprivation on human decision-making across various reward types. Using both a non-parametric approach and a classical economic ...