Realistic utility versus game utility: a proposal for dealing with the spread of uncertain prospects

FROSINI, BENITO VITTORIO; Dipartimento Di Scienze Statistiche - Università Cattolica Del Sacro Cuore Di Milano
The author develops the properties and implications of a proposal, concerning a summary statistic of the random prospect of utilities. Following a suggestion of Allais, such a statistic is increasing with expected utility, and decreasing – for most people, who are risk averse – with the mean absolute deviation of utilities; a parameter multiplying this disper sion measure allows for risk averse or risk prone behaviour, according to its sign, and also for more or...