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Decision Theory

Decision Theory. Lecture 13. Riskiness measures and gambling wealth Riskiness measures – the idea and description Aumann , Serrano (2008) – economic index of riskiness Foster, Hart (2009) – operational measure of riskiness

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Decision Theory

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  1. DecisionTheory Lecture 13

  2. Riskinessmeasures and gamblingwealth • Riskinessmeasures – the idea and description • Aumann, Serrano (2008) – economicindex of riskiness • Foster, Hart (2009) – operationalmeasure of riskiness • Buying and sellingprice for a lottery and theconnection to riskinessmeasures • Lewandowski (2010) • Twoproblemsresolved by gamblingwealth • Rabin (2000) paradox • Buying/sellingprice gap (WTA/WTP disparity)

  3. The idea

  4. Quest for operationalmeaning

  5. Log is „the first” functiongoingfromabovethatassigns – infinity to bankruptcy

  6. Example

  7. f(W)=Elog(W+x)-log(W) Max loss W>R(x) W<R(x) W*=R(x)

  8. Lotterydillution

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