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on Utility Models and Prospect Theory |
| By: | Roland Kirstein (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | If the production of a risk-neutral monopolist is in uenced by a random variable, then the expected prot is decreasing in the variance of the production process. |
| Keywords: | Risk-aversion, correlated random variables, market power |
| JEL: | D81 L12 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:09012&r=upt |
| By: | Audrey Hu (Tinbergen Institute, University of Amsterdam); Steven A. Matthews (Department of Economics, University of Pennsylvania); Liang Zou (Faculty of Economics and Business, University of Amsterdam) |
| Abstract: | This paper analyzes the effects of buyer and seller risk aversion in first and second-price auctions. The setting is the classic one of symmetric and independent private values, with ex ante homogeneous bidders. However, the seller is able to optimally set the reserve price. In both auctions the seller’s optimal reserve price is shown to decrease in his own risk aversion, and more so in the first-price auction. Thus, greater seller risk aversion increases the ex post efficiency of both auctions, and especially that of the first-price auction. The seller’s optimal reserve price in the first-price, but not in the second-price, auction decreases in the buyers’ risk aversion. Thus, greater buyer risk aversion also increases the ex post efficiency of the first but not the second-price auction. At the interim stage, the first-price auction is preferred by all buyer types in a lower interval, as well as by the seller. |
| Keywords: | first-price auction, second-price auction, risk aversion, reserve price |
| JEL: | D44 |
| Date: | 2009–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:09-016&r=upt |
| By: | Hervés-Beloso, Carlos; Monteiro, Paulo Klinger |
| Abstract: | It is an easy task for most commodity spaces, to find examples of strictly monotonic preference relations. For example, in the space of bounded sequences of real numbers.. However, it is not easy for spaces like the space of bounded functions defined in the real interval [0, 1]. In this note we investigate the roots of this difficulty. We show that strictly monotonic preferences on the space of bounded function on any set K always exist. However, if K is uncountable no such preference is continuous and none of them have a utility representation. |
| Keywords: | utility representation/ strictly monotonic preferences |
| JEL: | D11 B50 |
| Date: | 2009–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15157&r=upt |
| By: | Lin, Shanshan; Mullen, Jeffrey D.; Hoogenboom, Gerrit |
| Abstract: | An agronomic crop growth model, Decision Support System for Agro-Technology Transfer (DSSAT), is used to find optimal crop management strategies for cotton production in Mitchell, Miller, and Lee Counties in Georgia during the past 10 years. Planting date and irrigation threshold are the two variables optimized to maximize farmer's expected utility. A decreasing absolute risk aversion - constant relative risk aversion (DARA-CRRA) utility function is used to examine crop management decision that can be influenced by changes in inter-temporal risk behavior. Comparison is made from management perspective - one is dynamic crop management strategy that varies each year; one is static (constant) strategy over 10 years. Based on the best crop management strategies, index insurance products are designed to help farmers further reduce production risk. The impact of geographical basis risk was assessed by comparing the risk reduction generated from index insurance contracts based on different weather stations; the impact of temporal basis risk is assessed by allowing separate contracts to be purchased for different sub-periods during the entire period. |
| Keywords: | Irrigation, Planting Date, Risk Management, Weather Derivative Contract, Basis Risk, Agribusiness, Agricultural Finance, Crop Production/Industries, Farm Management, Financial Economics, Risk and Uncertainty, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49350&r=upt |
| By: | Bogliacino, F; Rampa, G |
| Abstract: | In this paper we generalize the heterogeneous risk adverse agents model of diffusion of new products in a multi-firm, heterogeneous and interacting agents environment. We use a model of choice under uncertainty based on Bayesian theory. We discuss the possibility of product failures, the set of equilibria, their stability and some welfare properties. |
| Keywords: | Product diffusion; Risk aversion; Lock-in; Monopolistic competition; Multiple equilibria |
| JEL: | D81 O33 L15 |
| Date: | 2009–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15120&r=upt |
| By: | F. Barigozzi; R. Levaggi |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:656&r=upt |