Zurück zum Heft
Cover von: Prevent or Cure? Trading in the Face of Skewed Binary Lotteries
Julien Jacob, Marielle Brunette, Louis Eeckhoudt

Prevent or Cure? Trading in the Face of Skewed Binary Lotteries

Rubrik: Articles
Jahrgang 178 (2022) / Heft 2, S. 130-169 (40)
Publiziert 20.06.2022
DOI 10.1628/jite-2022-0009
Veröffentlicht auf Englisch.
Normalpreis / List price
inkl. gesetzl. MwSt.
  • Artikel PDF
  • lieferbar
  • 10.1628/jite-2022-0009
Aufgrund einer Systemumstellung kann es vorübergehend u.a. zu Zugriffsproblemen kommen. Wir arbeiten mit Hochdruck an einer Lösung. Wir bitten um Entschuldigung für die Umstände.
Beschreibung
We analyze the choice of a risk-averse decision maker who faces two lotteries that exhibit a trade-off between a reduction in the probability of a loss occurring and its magnitude. We make a theoretical analysis with skewed binary lotteries: lottery A is associated with a lower magnitude and a higher probability of a loss occurring than lottery B. We show that any risk-averse decision maker will prefer A to B when the expected gain of A is higher than or equal to the expected gain of B. However, in the opposite case, additional assumptions on individuals' prudence are required. We experimentally test our theoretical predictions, and provide applications and policy recommendations.