Agents with standard, time-separable preferences do not care about the temporal distribution of risk. This is a strong assumption. For example, it seems plausible that a consumer may …nd persistent shocks to consumption less desirable than uncorrelated ‡uctuations. Such a consumer is said to exhibit temporal risk aversion. This paper examines the implications of temporal risk aversion for asset...

The relationship between risk in the environment, risk aversion and inequality aversion is not well understood. Theories of fairness have typically assumed that pie sizes are known ex-ante. Pie sizes are, however, rarely known ex ante. Using two simple allocation problems—the Dictator and Ultimatum game—we explore whether, and how exactly, unknown pie sizes with varying degrees of risk (“endowm...

We extend the analysis of the intertemporal utilitymaximization problem for HindyHuang-Kreps utilities reported in Bank and Riedel (1998) to the stochastic case. Existence and uniqueness of optimal consumption plans are established under arbitrary convex portfolio constraints, including the cases of both complete and incomplete markets. For the complete market setting, Kuhn-Tucker-like necessar...

conjunctive use of ground and surface water can increase reliability of the water supply by providing independent sources. in this study, corrected utility-efficient pro-gramming that allows for more than one seasonal irrigation depth for each crop was used to determine the amount of utility maximizing investment in the well capacity for conjunctive use. results showed that optimum investment a...

We test whether induced mood states have an effect on elicited risk and time preferences in a conventional laboratory experiment. We jointly estimate risk and time preferences and find that subjects induced into a negative mood exhibit economically significant higher risk aversion than those in the control treatment. Those in the positive mood treatment exhibit even higher risk aversion. We fin...

Traditional real options analysis addresses investment under uncertainty assuming a risk-neutral decision maker and complete markets. In reality, however, decision makers are often risk averse and markets are incomplete. Additionally, capital projects are seldom nowor-never investments and can be abandoned, suspended, and resumed at any time. In this thesis, we develop a utility-based framework...

Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be captured by any expected utility model. We initiate the study of revenue-optimal mechanisms under buyer behavioral models beyond expected utility theory. We ...

Risk aversion is a fundamental concept in economics used to explain agents' behavior under uncertainty. Risk aversion in auctions has been justified through the many uncertainties faced by bidders and through the large value of bids relative to bidders' assets. In first-price auctions, risk aversion renders more aggress­ sive bidding, while bidding in ascending auc­ tions is not affected, leadi...

Both the equity premium puzzle and the credit spread puzzle address the problem of a reasonable size of agents’ risk aversion. The empirical estimation of risk aversion parameters is impeded by the fact that observed prices depend on risk preferences and probability beliefs. The market for German redemption lottery bonds constitutes a clean environment to estimate risk aversion coefficients fro...

In this paper we examine the effect of stochastic volatility on optimal portfolio choice in both partial and general equilibrium settings. In a partial equilibrium setting we derive an analog of the classic Samuelson–Merton optimal portfolio result and define volatility-adjusted risk aversion as the effective risk aversion of an individual investing in an asset with stochastic volatility. We ex...