The Arrow-Pratt (A-P) definitions of absolute and relative risk aversion dominate the discussion of risk aversion and defining “more risk averse”. Ross (Econometrica 49:621–663, 1981) notes, however, that being A-P more risk averse is not sufficient for addressing many important comparative static questions. Consequently he introduces “a new and stronger measure for comparing two agents’ attitu...

We consider competition between two decentralized supply chains network under demand uncertainty. Each chain consists of one risk-averse manufacturer and a group of risk-averse retailers. These two chains present substitutable products to the geographical dispensed markets. The markets’ demands are contingent upon prices, service levels, and advertising efforts of two supply chains. We formulat...

A well-known bias in risky decision making is that most people tend to be risk averse when gains are salient but risk seeking when losses are salient. The present study addressed the neural dynamics of this process by recording ERPs during a gambling task in a gain and a loss context. Behaviorally, participants were found to be risk averse in the gain context but risk neutral in the loss contex...

Glucose is a universal phagostimulant in many animal species, including the cockroach Blattella germanica. However, some natural populations of B. germanica have been found that are behaviorally deterred from eating glucose. In dose-response studies, glucose was a powerful phagostimulant for wild-type cockroaches, but it strongly deterred feeding in a glucose-averse strain. Both strains, howeve...

Consider a dynamic decision making model under risk with a fixed planning horizon, namely the dynamic capacity control model. The model describes a firm, operating in a monopolistic setting and selling a range of products consuming a single resource. Demand for each product is time-dependent and modeled by a random variable. The firm controls the revenue stream by allowing or denying customer r...

This paper examines the relationship between two types of preference: preference of intertemporal choices and preference towards risk. In the simplest form of the constant relative risk aversion utility function, the intertemporal elasticity of substitution (IES) and risk aversion has an inverse relationship. However, there is no empirical evidence that suggests this inverse relationship holds....

We describe a two-sector, general-equilibrium model of productive sorting under output risk and incomplete information. Risk-neutral (entrepreneurial) individuals can either produce alone, or – acting as employers/insurers – team up with risk-averse (non-entrepreneurial) individuals. Although the latter option has the potential to generate more surplus, when effort is unobservable and risk is h...

We analyze a market populated by expected utility maximizers and smooth ambiguity-averse consumers. We study conditions under which ambiguity-averse consumers survive and affect prices in the limit. If ambiguity vanishes with time or if the economy exhibits no aggregate risk, ambiguity-averse consumers survive, but have no long-run impact on prices. In both scenarios, ambiguity-averse consumers...

We use Markov risk measures to formulate a risk-averse version of the undiscounted total cost problem for a transient controlled Markov process. We derive risk-averse dynamic programming equations and we show that a randomized policy may be strictly better than deterministic policies, when risk measures are employed. We illustrate the results on an optimal stopping problem and an organ transpla...

The traditional two-stage stochastic programming approach assumes the distribution of the random parameter in a problem is known. In most practices, however, the distribution is actually unknown. Instead, only a series of historic data are available. In this paper, we develop a data-driven stochastic optimization framework to provide a risk-averse decision making under uncertainty. In our appro...