Methods for measuring risk-aversion: problems and solutions

2013 Joint IMEKO (International Measurement Confederation) TC1-TC7-TC13 Symposium: Measurement Across Physical and Behavioural Sciences

Thomas, P.J.^1

Risk Management, Reliability and Maintenance Group, School of Engineering and Mathematical Sciences, City University London, Northampton Square, London EC1V 0HB, United Kingdom^1

关键词: Decision makers;    Limiting values;    Potential loss;    Problems and Solutions;    Risk aversion;    Risk neutrals;    Three-term;    Utility functions;   

Others  :  https://iopscience.iop.org/article/10.1088/1742-6596/459/1/012019/pdf
DOI  :  10.1088/1742-6596/459/1/012019

来源: IOP

【 摘 要 】

Risk-aversion is a fundamental parameter determining how humans act when required to operate in situations of risk. Its general applicability has been discussed in a companion presentation, and this paper examines methods that have been used in the past to measure it and their attendant problems. It needs to be borne in mind that risk-aversion varies with the size of the possible loss, growing strongly as the possible loss becomes comparable with the decision maker's assets. Hence measuring risk-aversion when the potential loss or gain is small will produce values close to the risk-neutral value of zero, irrespective of who the decision maker is. It will also be shown how the generally accepted practice of basing a measurement on the results of a three-term Taylor series will estimate a limiting value, minimum or maximum, rather than the value utilised in the decision. A solution is to match the correct utility function to the results instead.