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on Utility Models and Prospect Theory |
| By: | Yi-Hsuan Lin |
| Abstract: | In random expected utility (Gul and Pesendorfer, 2006), the distribution of preferences is uniquely identified from random choice. This paper investigates whether such identification extends beyond expected utility. We first show that when risk preferences conform to the disappointment aversion model of Gul (1991), the distribution of preferences remains uniquely identified. To assess the scope of this result, we then examine other models of non-expected utility. Within the broader class of betweenness preferences (Dekel, 1986), random utility can be unidentifiable. If preferences are confined to the weighted expected utility class (Chew, 1983), a more nuanced picture emerges: unique identification holds in a three-prize setting but fails with four or more prizes. These findings show that the uniqueness property of random expected utility may persist beyond expected utility, but its persistence critically depends on the class of risk preferences under consideration. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.15790 |
| By: | Symeon Vaidanis; Marios Kountouris |
| Abstract: | In multi-objective and multi-criteria decision-making under risk, especially in settings involving individual behavior, risk-aware analysis based on subjective evaluation has become increasingly important. Moving beyond risk-neutral modeling and the constraints of Expected Utility Theory (EUT), Cumulative Prospect Theory (CPT) provides a behaviorally grounded framework for capturing how individuals perceive and evaluate risky prospects. This paper conducts a rigorous theoretical analysis of Neilson's definitions of aversion. We provide a gamble-based interpretation, sharpen key conceptual distinctions, and make explicit the conditions under which the weak and strong notions coincide as well as when they diverge. Furthermore, we examine the Kobberling-Wakker utility function and related standard CPT specifications, highlighting structural limitations and inconsistencies that arise when these forms are required to satisfy Neilson-type aversion conditions. To address these issues, we propose a generalized CPT-utility function that retains the canonical reference-dependent shape while offering additional flexibility. This generalization extends the descriptive scope of CPT and provides an explicit functional form that is useful for sensitivity analysis and utility function-based optimization. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.22085 |
| By: | Battaglini, Marco; Palfrey, Thomas R |
| Abstract: | We study the volunteer’s dilemma in environments with heterogeneous preferences and private information. We characterize the efficiency properties of equilibrium, which is a departure from all the previous literature that focuses only on the probability of group success. While the probability of success may be non-monotonic in the size of the group, we show that per-capita welfare is always increasing for all types, strictly for sufficiently high types. As group size increases, the expected utility of every type converges to the expected utility of the type with the lowest possible cost, which is the same expected utility when there is no free rider problem, i.e., when there is only a single player in the game and that player has the lowest possible cost. |
| JEL: | D71 D72 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19544 |
| By: | Christian Oliver Ewald |
| Abstract: | The Arrow-Pratt approximation is one of the cornerstones of expected utility theory, providing the classical local approximation of certainty equivalents and risk premia in terms of absolute risk aversion. Despite its widespread use, its mathematical scope and relationship to higher-order risk preferences remain only partially understood. This paper develops a new framework for the analysis of certainty equivalents and dynamic risk premia based on Malliavin calculus and Wiener chaos analysis. We first show that the classical Arrow-Pratt approximation is not asymptotically valid for arbitrary sequences of vanishing risks, thereby identifying precise limitations of the traditional theory. Motivated by this observation, we formulate certainty equivalents dynamically by considering the progressive revelation of uncertainty through a Brownian filtration. Combining It\^o calculus, the Clark--Ocone representation and the Wiener chaos decomposition, we derive a complete hierarchy of higher-order dynamic risk premia and obtain explicit representations of the corresponding coefficients in terms of Malliavin derivatives. For mixed Wiener chaos expansions, higher-order preference measures, including prudence and temperance, emerge naturally through interactions between chaos components and are characterised using Bell polynomial representations. Explicit results for quadratic Gaussian functionals and the Vasicek interest-rate model illustrate the theory and identify a broad class of regular Wiener functionals for which the classical Arrow-Pratt approximation is recovered as the leading-order term. The results establish a unified framework linking expected utility theory, stochastic analysis and Wiener chaos expansions, opening a new perspective on higher-order certainty equivalents and the dynamic measurement of risk. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.23161 |
| By: | Sascha Desmettre; Philipp C. Hornung |
| Abstract: | We consider a novel robust utility maximisation problem under bounded cumulative transition rate uncertainty within the class of non-Markovian marked point processes on a finite state-space. Utility is maximised over the class of admissible controls, while Nature chooses a worst-case biometric scenario from the class of admissible, path-dependent cumulative transition rates restricted by path-dependent upper and lower bounds. We prove a martingale optimality principle and a novel existence and uniqueness result for a non-standard worst-case backwards stochastic differential equation, which allows us to establish existence and uniqueness of worst-case and best-case prospective reserves of life and health insurance contracts with reserve-dependent payments. Finally, we find an explicit solution of a novel robust consumption-insurance problem with power utility preferences. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.16935 |
| By: | Masashi Sekine |
| Abstract: | We study equilibrium price formation in an incomplete financial market with a large population of agents, where stock prices are subject to a single-default event. Agents are assumed to be heterogeneous in their risk aversion and terminal liabilities, and maximize exponential utility of terminal net wealth. We first characterize each agent's optimal strategy by a quadratic-growth backward stochastic differential equation (BSDE) driven by Brownian motions and a compensated default martingale. We then formulate the market-clearing condition in terms of aggregate optimal demand and derive a mean-field quadratic-growth BSDE for the equilibrium risk premium. The resulting characterization quantifies how default intensity, jump size, and agent heterogeneity jointly shape the default-risk component of equilibrium security risk premia. Under a Markovian factor model, we establish short-time solvability of the mean-field BSDE through a fixed-point argument based on estimates for a coupled semilinear PDE system. Finally, we show that the risk premium characterized by the mean-field BSDE asymptotically clears the market as the population size tends to infinity. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.17502 |
| By: | Hao Liu; Yang Liu; Zhenyu Shen |
| Abstract: | We study optimal investment for insurers managing participating (profit-sharing) contracts under probability distortion and probability benchmark (aspiration) constraints. The problem combines three theoretical complexities: (i) nonconcave effective utilities induced by embedded guarantees and surplus-sharing rules, (ii) probability weighting capturing behavioral aspects of long-horizon decisions, and (iii) aspiration-type constraints formalizing solvency requirements. Using quantile formulations and concavification techniques, we derive explicit closed-form solutions for optimal terminal wealth and trading strategies in both complete and incomplete Black-Scholes markets. Our utility class accommodates the piecewise hyperbolic absolute risk aversion (PHARA) family and covers nonconcavities arising naturally in insurance contexts. The framework reveals how probability distortion weakens lock-in behavior and induces time inconsistency: under inverse S-shaped distortions, insurers overestimate upside probabilities and increase risky investment relative to undistorted benchmarks. Asymptotic analysis and numerical illustrations demonstrate regime switches in optimal policies driven by regulatory thresholds and capital constraints. Our results extend the hope-fear-aspirations framework of He and Zhou (2016) and provide practical insights for managing insurance balance sheets under behavioral preferences and solvency constraints. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.15743 |
| By: | Krueger, Dirk; Uhlig, Harald; Li, Fulin |
| Abstract: | This paper characterizes the transition dynamics of a continuous-time neoclassical production economy with capital accumulation in which households face idiosyncratic income risk and cannot commit to repay their debt. Therefore, even though a full set of contingent claims that pay out conditional on the realization of idiosyncratic shocks is available, the equilibrium features imperfect insurance and a non-degenerate cross-sectional consumption distribution. When household labor productivity takes two values, one of which is zero, and the utility function is logarithmic, we characterize the entire transition dynamics induced by unexpected technology shocks, including the evolution of the consumption distribution, in closed form. Thus, the model constitutes an analytically tractable alternative to the standard incomplete markets general equilibrium Aiyagari (1994) model by retaining its physical environment, but replacing the incomplete asset markets structure with one in which limits to consumption insurance emerge endogenously due to limited commitment. |
| JEL: | E21 D11 D91 G22 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19471 |
| By: | Evan M. Calford |
| Abstract: | This paper introduces ambiguity-dominance as a novel equilibrium selection procedure that, in 2x2 games, unifies risk-dominance and payoffdominance as special cases. Ambiguity-dominance provides an intuitive answer to the question "Which equilibrium is most robust to ambiguous beliefs about the behavior of other players?" and is defined for all finite normal form games. Ambiguity-dominance is parametrized by players' ambiguity preference and, using data from three recent experiments we find, on aggregate, ambiguity loving coupled with substantial subject-level heterogeneity. |
| Keywords: | Equilibrium selection, ambiguity aversion |
| JEL: | C70 D81 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:acb:cbeeco:2026-707 |
| By: | Ambler, Kate; Bakhtiar, M. Mehrab; DeBrauw, Alan; Uddin, Mohammad Riad |
| Abstract: | Credit market failures may reflect voluntary withdrawal by risk-averse borrowers in addition to supply-side constraints. We conduct a randomized trial with 1, 517 Bangladeshi households, offering cattle financing through conventional loans or profit-sharing contracts that spread risk between the farmer and the financial partner. Overall, interest in and take-up of the profit-sharing contracts were modestly higher than the conventional loans. However, conventional loan take-up was much lower among risk-averse farmers, and profit-sharing eliminated the take-up gap between risk-averse and non-risk-averse farmers. We find that it is male risk preferences that are associated with these decisions even when contracts explicitly target women. Livestock investment increases under both contracts with no evidence of moral hazard under profit-sharing. |
| Keywords: | Agricultural Finance, Farm Management |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404341 |
| By: | Nader Karimi; Foad Shokrollahi; Masoumeh Shahmoradi |
| Abstract: | This paper investigates the optimal surplus management problem of an insurance company operating in a financial market with stochastic interest rates and jump-driven liabilities. The insurer dynamically allocates its surplus between a risky stock and a risk-free zero-coupon bond while facing insurance claims modeled by a compound Poisson process with exponentially distributed claim sizes. The short term interest rate follows a Cox-Ingersoll-Ross (CIR) process, which captures mean-reverting dynamics commonly observed in term structure models. The insurer maximizes the expected exponential utility of terminal surplus. Using stochastic control techniques, we derive the associated Hamilton-Jacobi-Bellman (HJB) equation. Although the exponential utility structure suggests an exponential affine representation, the interaction between the interest rate hedge and the surplus state generates quadratic surplus terms in the HJB equation. To obtain a tractable formulation, we adopt a normalized surplus projection method, which provides an approximate reduction of the full three-dimensional problem to a nonlinear system of partial differential equations (which is subsequently numerically validated). The optimal investment policy admits an economically meaningful decomposition consisting of a myopic demand component and an interest rate hedging component. Numerical experiments illustrate how the optimal strategy and the surplus distribution depend on interest rate volatility, claim intensity, and risk aversion. The results highlight the importance of jointly modeling stochastic interest rates and insurance liability risk when designing optimal investment policies for insurance companies. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.21687 |
| By: | G. Charles-Cadogan |
| Abstract: | This paper studies the willingness-to-accept/willingness-to-pay (WTA-WTP) gap under objective probabilities. Preferences over finite lotteries satisfy completeness, transitivity, continuity, weak independence, reference partition, and range dependence. Weak independence requires von Neumann-Morgenstern independence only for mixtures that preserve the reference point and do not move outcomes across the induced gain-loss partition. The representation, weak rank-dependent utility (WRDU), evaluates gains and losses by separate subutilities anchored at the reference point and recombines them through a range-dependent Lagrangian penalty coefficient \r{ho} on the loss-side component. The reciprocal index ${\lambda = 1/\rho}$ reports the WTA-WTP loss-aversion convention. The main result characterizes a normalized admissible transaction class in which the WTA-WTP gap follows from the asymmetric buying and selling indifference equations. In this class, ${\lambda} > 1$ suppresses WTP and elevates WTA, while $\rho > 1$ corresponds to gain seeking or loss attenuation. A fixed reciprocal loss-aversion index has no internal mechanism that makes the wedge converge to zero as transaction scale changes; attenuation requires a transaction path on which $\rho > 1$ and $\lambda$ converge to their common neutral value one. The analysis gives a decision-theoretic account of the endowment-effect wedge based on weakened independence, reference anchoring, semi-affine subutility normalization, and range-dependent penalization. The result is distinct from the Rabin calibration implication and does not rely on constant-relative-risk-aversion utility or probability weighting. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.27239 |
| By: | M. Ali Khan; Arthur Paul Pedersen; Maxwell B. Stinchcombe |
| Abstract: | Research on Nash equilibrium existence for infinite games has grown into a patchwork of technical preconditions and counterexamples. This paper presents a unified program in equilibrium theory by revising the predominant model of mixed strategies based on countable additivity. A game is specified by a nonempty set of players and, for each player, a nonempty action set and a bounded von Neumann-Morgenstern utility function. Every such game is shown to admit a Nash equilibrium in finitely additive mixed strategies. In addition, the equilibrium correspondence for any such game is shown to be nonempty, compact-valued, and upper hemicontinuous, and the same is true for equilibria obtained as limits of finite approximations. Techniques developed in this paper show that infinite games long treated as intractable become amenable to direct equilibrium analysis. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.15452 |
| By: | Bazley, William; Cuculiza, Carina; Korniotis, George |
| Abstract: | We examine the impact of perceived social discrimination on U.S. households' preferences, focusing on key aspects of prospect theory. Utilizing both field and experimental data, we find that perceiving discrimination increases risk tolerance, decreases loss aversion, and excessively distorts objective probabilities. These effects are primarily observed in racial/ethnic minorities, with no significant impact on White individuals. Emotional mechanisms, particularly anger, play a role in transmitting the effects of discrimination on preferences. Overall, our findings underscore how social factors, such as discrimination, can systematically shape fundamental preferences, and ultimately influencing economic decision-making. |
| Keywords: | Cumulative prospect theory; Experiment |
| JEL: | D01 D90 D91 G40 G41 G50 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19514 |
| By: | Barba, Francesca R.; Drichoutis, Andreas; Palma, Marco A.; Cerroni, Simone |
| Abstract: | Risk preferences play a central role in farmers’ decisions, such as technology adoption, diversification, and uptake of insurance and other risk-management tools; yet agricultural economics has largely focused on risk aversion, while higher-order risk preferences remain less explored. This paper studies the external validity of experimentally elicited risk aversion, prudence, and temperance in a sample of 162 Italian winegrowers. Preferences are measured through incentivized binary lottery choices and linked to stated intentions, self-reported risk-management behavior, and an observed preventive-technology adoption. Preliminary results show that all three attitudes are present in the sample and capture distinct behavioral dimensions. Risk aversion has no systematic association with external outcomes. Prudence is positively related to stated intentions, but not to observed behavior. Temperance is associated with current insurance status and with the absence of active defense practice adoption. Overall, higher-order risk preferences show limited, outcome-specific external validity for agricultural risk-management behavior. |
| Keywords: | Risk and Uncertainty |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404409 |
| By: | Bazley, William; Jannati, Sima; Korniotis, George |
| Abstract: | We examine whether grit affects the preferences and trading decisions of U.S investors. Grit is an important non-cognitive personality trait that is malleable and captures the sustained effort toward a goal despite setbacks. Using experiments formalized within prospect theory, we find that grit reduces loss aversion. Gritty investors are also more willing to exit losing investments and accumulate about 7% more wealth relative to control participants. Overall, our results suggest that grit affects the quality of investment decisions. Therefore, interventions cultivating grit could improve households' financial outcomes. |
| Keywords: | Prospect theory; Loss aversion; Disposition effect; Personality traits |
| JEL: | G11 G40 G41 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19513 |
| By: | Tim J. Boonen; Wing Fung Chong; Kenneth Tsz Hin Ng; Tak Wa Ng |
| Abstract: | We study peer-to-peer (P2P) insurance contracting between a risk-averse P2P reinsurer and multiple risk-averse peers in an asymmetric Nash-bargaining framework, where all agents seek to improve expected utility relative to their disagreement points. Consistent with the expected value premium principle, we impose a price-fairness condition requiring each peer's expected contribution to be based on a common loading applied to the peer's expected loss. To justify the bargaining formulation relative to a standard fixed-weight weighted-sum optimization problem, we provide an axiomatic characterization showing that the Nash bargaining solution satisfies properties well suited to voluntary P2P insurance contracting in small pools. We establish the existence and uniqueness of the optimal contract and derive first-order characterizations for the full-, partial-, and zero-reinsurance regimes. To address subgroup formation, we develop computationally tractable sufficient conditions that rule out viable coalitional deviations, both with and without price fairness. Our numerical study investigates the impact of price fairness and pool size on the optimal contract and agents' welfare. Price fairness reduces dispersion in risk allocations and certainty-equivalent loadings among peers. Regarding pool size, welfare need not increase monotonically, highlighting that risk-pool expansion depends not only on diversification but also on the evolution of bargaining power. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.09859 |
| By: | Tsetse, Wisdom Makafui; Chung, Chanjin; Lambert, Dayton |
| Abstract: | This study examines adverse selection directly in the cattle procurement market by analyzing the distribution of latent cattle quality inferred from a feedlot’s observed choices in an expected-utility maximization problem. Earlier studies are extended by directly testing for adverse selection, without relying on the significance of the IMR coefficient or on the specification of the widely used probit model to represent the sample selection process. We recover latent cattle quality using a framework that captures a feedlot’s optimal market choice under asymmetric information, price risk, and carcass quality uncertainty. The expected utility of profit for a feedlot is maximized with respect to the market choice probability, and the first-order condition is inverted to recover latent cattle quality from data. The Kolmogorov-Smirnov and Anderson-Darling tests are used to test differences in the empirical distribution functions of the recovered latent cattle quality for adverse selection. We find strong evidence of adverse selection in the analyzed dataset. Policies that encourage greater transparency in quality-related information for cattle marketed through the cash market could help alleviate this problem. |
| Keywords: | Marketing |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404543 |
| By: | Bruno Bouchard (CEREMADE); Lucas Gnecco Heredia (LAMSADE); Ludovic Moreau (CEREMADE); Kim-Anh Pham (CEREMADE) |
| Abstract: | As in Bouchard et al. (2010) and Bouchard and Nutz (2014), we study a utility maximization problem with expectation constraint. We first consider a uniformly elliptic case in which the endogenous state boundary associated with the constraint in expectation is proved to be smooth. This allows one to derive a proper Dirichlet condition for the value function of the optimal control problem on this boundary. We then propose a new truncation argument in the martingale representation of the expectation constraint. This leads to an approximating sequence of auxiliary systems of PDEs for which comparison holds. Convergence to the initial optimal control problem is proved. In the degenerate case, we propose another approximation which consists in adding a small noise term to recover uniformly ellipticity. Convergence is also proved. To the best of our knowledge, it is the first time that a full analysis is performed for such control problems, so as to open the doors to the use of numerical schemes. Numerical resolution in a toy example is performed using neural networks. It is complemented by an estimation of the numerical error, also performed by using a neural network approach. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.24114 |
| By: | Mikhail Perepelitsa |
| Abstract: | In this paper, we develop an open-economy macroeconomic model of a Proof-of-Stake network to analyze nominal token-price dynamics and the systemic effects of speculative capital. We first consider a network populated solely by active utility users, who finance network activity through a steady exogenous inflow of fiat currency. We prove the existence of a unique, globally asymptotically stable steady-state equilibrium with a well-defined nominal token price and derive a closed-form expression for the network's relaxation time. Calibrating the model using parameters representative of the current Ethereum network, we estimate a relaxation half-life of approximately 46 years. This extreme macroeconomic inertia implies that the token price may remain persistently displaced from its evolving steady-state benchmark, producing sustained price overshooting as the network adjusts to changing fundamentals. We then introduce an Investor class to examine the effects of passive and active speculative capital. We show that passive institutional staking compresses the native staking yield and creates a structural imbalance that systematically raises the nominal token price while shifting consensus ownership away from active utility users. Active speculative capital has a qualitatively different effect. In response to capital shocks, the Consumer class's rigid preference for fiat-denominated consumption generates an endogenous constant-value strategy. This mechanism shifts staked-token ownership from the Investor class toward active utility users, with potentially favorable implications for consensus decentralization. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.16622 |
| By: | Hiroaki Odahara (Market Design Center, Graduate School of Economics, The University of Tokyo; Graduate School of Informatics and Engineering, The University of Electro-Communications) |
| Abstract: | Scarce opportunities such as concert tickets and accelerator time may be contested by automated participants that can create accounts and sustain commitments beyond the reach of commitment-limited intended users. When account counts are untrusted, we study anonymous screening rules that ignore them, cap retained burdens, use only an account's commitment and strongest rival, and do not reassign after rejecting the leader. Within this class, we characterize the rule maximizing intended users' expected utility when they commit fully and a scalable entrant stays out. The optimum refunds and allocates at low congestion, retains and allocates at intermediate congestion, and retains while withholding allocation from an otherwise eligible leader when the strongest rival lies in the upper tail. Unlike a conventional reserve, which rejects a low leading bid, this rule treats an unusually strong rival as evidence of entrant imitation. A direct dual certificate proves class optimality; a benchmark shows that upper-tail holdback can raise intended-user surplus before it is necessary to support non-entry. The rule supports an equilibrium with full commitment and entrant non-entry. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.27817 |
| By: | Li, Xiaolei; Hu, Wuyang; Yu, Chenghui; Zhao, Minjuan |
| Abstract: | We propose a new bundled choice model to analyze premature food discarding and food waste arising from the misinterpretation of expiration date labels. Unlike conventional discard behavior models, our model allows consumers to discard either a single product or a bundle of products within one decision occasion. Using online survey data from Chinese consumers, we find substantial misinterpretation of the current food date labeling system. Such misinterpretation induces premature discarding behavior and consequently generates food waste. Modifying the wording of food date labels can substantially mitigate this problem. Among the alternative labels examined, replacing the current “Quality assured” label with “Not use if after” produces the strongest reduction in premature discarding and food waste. The “Best if used by” and “Use by” labels also improve outcomes to varying degrees. To evaluate food waste under bundled choice model, results indicate that consumers exhibit preferences for bundled discard behavior. Consequently, the conventional single choice model specification underestimates both the level of food waste induced by label misinterpretation and the effectiveness of alternative date labels in mitigating food waste. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404378 |
| By: | Dmitry Dagaev (New Economic School, HSE University); Elina Ibragimova (HSE University, Kyung Hee University); Ekaterina Lodneva (HSE University, New Economic School) |
| Abstract: | How do elite athletes adjust risk-taking across score contexts and tournament stages, and how do these patterns differ between men’s and women’s tournaments? We address these questions using a novel, manually coded rally-level dataset from the 2024 Olympic volleyball tournaments, covering 8, 670 rallies from 52 men’s and women’s matches. We operationalize risk through observable tactical choices — serve type and attack placement — and estimate how these choices respond to score context, set progression, and playoff stakes. We find that risk-taking is systematically gendered and context-dependent: men attempt riskier serves as sets near their end, while women grow more conservative when protecting a set lead. In attacking, both genders turn more cautious late in sets. This asymmetry aligns with prospect theory since serving is a loss-domain decision that invites risk-seeking, while attacking is a gain-domain decision that invites risk aversion. Contrary to expectations of caution under elimination pressure, both genders take more risks in the knockout stage. These findings extend behavioral models of risk to a high-stakes team sport setting, with implications for coaching and performance analysis. |
| Keywords: | risk-taking, prospect theory, gender differences, high-stakes games, sports economics, Olympic volleyball |
| JEL: | D81 Z20 J16 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:abo:neswpt:w0298 |
| By: | Cash Looi; Ruben Loaiza-Maya; Didier Nibbering |
| Abstract: | Standard multinomial probit (MNP) models specify symmetric latent utility distributions, implying that choice probabilities respond symmetrically to positive and negative covariate shifts of the same magnitude. This restriction is often implausible in empirical choice settings and can lead to misleading elasticity and substitution predictions. We propose a skewed multinomial probit (SMNP) model that captures asymmetric choice responses by specifying a multivariate skew-normal distribution for the latent utilities. The model preserves the flexible substitution patterns of the MNP framework, introduces alternative-specific skewness parameters, and nests the standard MNP model when skewness is zero. Introducing skewness creates identification and computational challenges because the skewness parameters interact with the MNP scale normalization and disrupt the conditional Gaussian updating structure used in Bayesian MNP estimation. We address these challenges through a covariance reparameterization that enforces identification and positive definiteness by construction, interpretable priors on the identified parameter space, and a double data-augmentation scheme that yields a Metropolis-Hastings within Gibbs sampler. Numerical experiments and applications to consumer choice data show that SMNP recovers asymmetric choice responses, improves probabilistic prediction, and produces economically meaningful differences in price elasticities and substitution patterns. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.10336 |
| By: | Biais, Bruno; Mariotti, Thomas; Moinas, Sophie; Pouget, Sebastien |
| Abstract: | We study asset pricing and risk sharing in experimental financial markets. We design our experiment to test the key equilibrium implications of rational choice and competitive behavior in complete markets without making parametric assumptions on preferences. We find that participants behave competitively but deviate from rationality, as around 25% of their actions are first-order stochastically dominated. We propose a random-choice model predicting that, as the number of participants grows large, prices and average per-participant trades converge to those in the rational-choice competitive equilibrium. This prediction is supported by our experimental data. We structurally estimate a special case of the random-choice model with CRRA utilities and logit weighting functions and find that only around 80% of participants benefit from participating in the market. |
| JEL: | C92 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19420 |