TY - JOUR

T1 - On risk aversion and bargaining outcomes

AU - Volij, O.

AU - Winter, E.

PY - 2002/10

Y1 - 2002/10

N2 - We revisit the well-known result that asserts that an increase in the degree of one's risk aversion improves the position of one's opponents. To this end, we apply Yaari's dual theory of choice under risk both to Nash's bargaining problem and to Rubinstein's game of alternating offers. Under this theory, unlike under expected utility, risk aversion influences the bargaining outcome only when this outcome is random, namely, when the players are risk lovers. In this case, an increase in one's degree of risk aversion increases one's share of the pie. © 2002 Elsevier Science (USA). All rights reserved.

AB - We revisit the well-known result that asserts that an increase in the degree of one's risk aversion improves the position of one's opponents. To this end, we apply Yaari's dual theory of choice under risk both to Nash's bargaining problem and to Rubinstein's game of alternating offers. Under this theory, unlike under expected utility, risk aversion influences the bargaining outcome only when this outcome is random, namely, when the players are risk lovers. In this case, an increase in one's degree of risk aversion increases one's share of the pie. © 2002 Elsevier Science (USA). All rights reserved.

KW - Bargaining

KW - Non-expected utility

KW - Risk aversion

U2 - 10.1016/S0899-8256(02)00019-2

DO - 10.1016/S0899-8256(02)00019-2

M3 - Journal article

VL - 41

SP - 120

EP - 140

JO - Games and Economic Behavior

JF - Games and Economic Behavior

SN - 0899-8256

IS - 1

ER -