Discrete choice estimation of risk aversion
Discrete choice estimation of risk aversion
We analyze the use of discrete choice models for the estimation of riskaversion and show a fundamental flaw in the standard random utility model whichis commonly used in the literature. Specifically, we find that given two gambles, theprobability of selecting the riskier gamble may be larger for larger levels of risk aversion.We characterize when this occurs. By contrast, we show that the alternativerandom preference approach is free of such problems.
- Universitat Pompeu Fabra Spain
random preference models., Behavioral and Experimental Economics, discrete choice, Discrete Choice; Structural Estimation; Risk Aversion; Random Utility Models; Random Preference Models., Microeconomics, risk aversion, discrete choice; structural estimation; risk aversion; random utility models; random preference models., random utility models, discrete choice, structural estimation, Risk Aversion, random utility models, random preference models, structural estimation, jel: jel:D81, jel: jel:C25
random preference models., Behavioral and Experimental Economics, discrete choice, Discrete Choice; Structural Estimation; Risk Aversion; Random Utility Models; Random Preference Models., Microeconomics, risk aversion, discrete choice; structural estimation; risk aversion; random utility models; random preference models., random utility models, discrete choice, structural estimation, Risk Aversion, random utility models, random preference models, structural estimation, jel: jel:D81, jel: jel:C25
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