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  • JEBO_4472

    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Economic Behavior and Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior and Organization, ?, ?, 2019 DOI: 10.1016/j.jebo.2018.11.010

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On the Contribution of the Markowitz Model of Utility to Explain Risky Choice in Experimental Research

Research output: Contribution to journalJournal article

E-pub ahead of print
<mark>Journal publication date</mark>23/11/2018
<mark>Journal</mark>Journal of Economic Behavior and Organization
Publication statusE-pub ahead of print
Early online date23/11/18
Original languageEnglish

Abstract

It is becoming increasingly common to accept that heterogeneity of preferences is an appropriate approach to describe aggregate experimental data on risky choice. We propose a parametric form of utility consistent with Markowitz’s (1952) hypotheses as a useful model to consider. This value function exhibits the fourfold attitude to risk and can also capture different combinations of risk attitudes and higher-order preferences. Moreover, it can be combined with probability weighting functions as well as with other value functions as part of mixture models that capture heterogeneity of preferences. We employ data from three recent experimental studies and show that this model can contribute to the explanation of their findings.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Journal of Economic Behavior and Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior and Organization, ?, ?, 2019 DOI: 10.1016/j.jebo.2018.11.010