Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: We show that under plausible levels of background risk, no theory of choice under risk---such as expected utility theory, prospect theory, or rank dependent utility---can simultaneously satisfy the following three economic postulates: (i) Decision-makers are risk-averse over small gambles, (ii) they respect stochastic dominance, and (iii) they account for background risk.

Written with Xiaosheng Mu, Philipp Strack, and Omer Tamuz.

This seminar was originally scheduled for Wednesday, January 13.

How to view the seminar:
Sign up for a free twitch.tv account, and tune in on Wednesdays at noon pacific time on twitch.tv/caltechecontheory. You will be able to ask questions on the twitch chat.