Boundedly rational expected utility theory
In: Journal of risk and uncertainty, Band 57, Heft 3, S. 199-223
ISSN: 1573-0476
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In: Journal of risk and uncertainty, Band 57, Heft 3, S. 199-223
ISSN: 1573-0476
In: American economic review, Band 92, Heft 3, S. 613-624
ISSN: 1944-7981
We investigate the ability of expected utility theory to account for simultaneous gambling and insurance. Contrary to a previous claim that borrowing and lending in perfect capital markets removes the demand for gambles, we show expected utility theory with nonconcave utility functions can explain gambling. When the rates of interest and time preference are equal, agents seek to gamble unless income falls in a finite set of values. When they differ, there is a range of incomes where gambles are desired. Different borrowing and lending rates can account for persistent gambling provided the rates span the rate of time preference.
In: Review of Business and Economics Studies. 2023;11(2):67-72. DOI: 10.26794/2308-944X-2023-11-2-67-72
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In: American political science review, Band 74, Heft 4, S. 917-931
ISSN: 1537-5943
An expected utility theory of necessary, but not sufficient, conditions for the initiation and escalation of serious international conflicts, including war, is proposed. The theory leads to the seemingly obvious generalization that actors do not initiate wars—or serious disputes—if they do not expect to gain from doing so. Underlying that generalization are a number of counterintuitive deductions. For instance, I show that though a weak nonaligned state cannot rationally attack a stronger nonaligned nation, it might be able to attack a stronger adversary that, in addition to its own strength, expects to derive support from allies. I also show that serious conflict is more likely between very close allies than between enemies. Systematic tests, using data on serious international threats, military interventions, and interstate wars, as well as 17 cases of known attempts at deterrence, show very substantial support for the expected utility propositions deduced from the theory.
In: History of political economy, Band 30, Heft 3, S. 413-426
ISSN: 1527-1919
In: Economica, Band 33, Heft 131, S. 347
In: Economica, Band 17, Heft 68, S. 355
In: Journal of political economy, Band 58, Heft 5, S. 373-396
ISSN: 1537-534X
In: Journal of political economy, Band 58, Heft 4, S. 307-327
ISSN: 1537-534X
In: International Economic Review, Band 59, Heft 2, S. 537-555
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In: Mathematical social sciences, Band 113, S. 116-135
In: American political science review, Band 74, Heft 4
ISSN: 0003-0554
In: Economica, Band 20, Heft 80, S. 356
In: The Economic Journal, Band 76, Heft 303, S. 611