Paper Status Tracking
Contact us
[email protected]
Click here to send a message to me 3275638434
Paper Publishing WeChat

Article
Affiliation(s)

Warsaw University of Technology, Warsaw, Poland

ABSTRACT

Many important economic decisions involve an element of risk. Risk aversion is a concept in economics, game theory, finance, and psychology related to the behavior of consumers, players, and investors under uncertainty. Loss aversion is an important component of a phenomenon that has been widely discussed in recent years. It refers to a tendency to feel the pain of a loss more acutely than the pleasure of an equal-sized gain. Many scientists have analyzed the problem of profitability in games. Some authors presented certain features which characterize “safe” games played once. Kahneman and Tversky (1991) showed that the ratio of loss aversion to gain attraction should amount to 1:2. The aim of this paper is to show an asymptotically efficient strategy which enables the risk-averse player to establish boundary variables of loss and gain at each stage of a repeated game.

KEYWORDS

asymptotically efficient adaptive allocation rule, one-armed bandit problem, risk aversion, repeated games

Cite this paper

Economics World, Nov.-Dec. 2018, Vol. 6, No. 6, 487-496 doi: 10.17265/2328-7144/2018.06.008

References

Anantharam, V., Varaya, P., & Warland, J. (1987). Asymptotically efficient allocation rules for multiarmed bandit problem with multiple plays. IEEE Transactions on Automatic Control, 32(11), 968-982.

Arrow, K. (1965). Aspects of the theory of risk-learning. Helsinki: Yrjö Johnssonin Sätiö.

Aumann, R. J., & Serrano, R. (2007, July). An economic index of riskiness. 3th Spain Italy Netherlands Meeting on Game Theory (SING 3), Amsterdam.

Drabik, E. (2010). Asymptotically efficient adaptive allocation rule as a method of rejecting low and excessively high risk. Statistical Review, 1(57), 53-65.

Epstein, L. G. (1992). Behavior under risk: Recent developments. In. J. L. Laffont (Ed.), Theory and applications in advances in economic theory (Vol. II, pp. 1-63). Cambridge University Press.

Ethier, S. N. (2010). The doctrine of chances: Probabilistic aspects of gambling. Berlin-Heidelberg: Springer Verlag.

Kimball, M. S. (1991). Standard risk aversion. NBER Technical Working Paper, 99.

Mass-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomic theory. New York: Oxford University Press.

Lai, T. L., & Robbins, H. (1985). Asymptotically efficient adaptive allocation rules. Advanced in Applied Mathematics, 6, 4-22.

Palacios-Huerta, I., & Serrano, R. (2006). Rejecting small gambles under expected utility. Economics Letters, 91, 250-259.

Pratt, J. W. (1964). Risk aversion in the small and in the large. Econometrica, 1(32), 122-136.

Rabin, M. (2000). Risk aversion and expected utility: A calibration theorem. Econometrica, 68, 1287-1292.

Rabin, M., & Thaler, R. H. (2001). Anomalies risk aversion. Journal of Economic Properties, 15(1), 219-232.

Segal, U., & Spivak, A. (1990). First order versus second order risk aversion. Journal of Economic Theory, 51, 111-125.

Tversky, A., & Kahneman, R. (1991). Loss aversion in riskless choice: A reference-dependent model. Quarterly Journal of Economics, 106, 204-217.

About | Terms & Conditions | Issue | Privacy | Contact us
Copyright © 2001 - David Publishing Company All rights reserved, www.davidpublisher.com
3 Germay Dr., Unit 4 #4651, Wilmington DE 19804; Tel: 1-323-984-7526; Email: [email protected]