Simultaneous Risk Aversion and Risk-Seeking Behavior in an Expected Utility Framework with Optimism

10 Pages Posted: 19 Apr 2019

Date Written: April 15, 2019

Abstract

Risk-averse optimism provides a parsimonious explanation of simultaneous purchase of unfairly-priced insurance and unfairly-priced lottery tickets. The simplicity of this approach contrasts with the complexity of prospect theory.

Keywords: optimism, prospect theory, Friedman-Savage utility, insurance, gambling, lotteries

Suggested Citation

Heaton, J.B., Simultaneous Risk Aversion and Risk-Seeking Behavior in an Expected Utility Framework with Optimism (April 15, 2019). Available at SSRN: https://ssrn.com/abstract=3362094 or http://dx.doi.org/10.2139/ssrn.3362094

J.B. Heaton (Contact Author)

J.B. Heaton, P.C. ( email )

20 West Kinzie
17th Floor
Chicago, IL 60654
United States
(312) 487-2600 (Phone)

HOME PAGE: http://jbheaton.com

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