Desire comes in two kinds: attraction and aversion. But contemporary theories of desire have paid little attention to the distinction, and some philosophers doubt that it is psychologically real. I argue that one reason to think there is a difference between the attitudes, and to care about it, is that attractions and aversions contribute in radically different ways to our well-being. Attraction-motivated activity adds to the good life in a way that aversion-driven activity does not. I argue further (...) that the value of attraction-motivated activity is irreducible to the prudential value of pleasure or desire-satisfaction. Rather, it contributes in a distinctive way to the felt meaningfulness of life. In the end, I offer a hypothesis: when we are attracted to something, we see it as (noncomparatively) good; and it is only when we pursue the apparent good that we see ourselves as engaged with the type of value that makes our lives and the universe worth maintaining. (shrink)

According to desire satisfactionism, well-being consists in getting what you desire. Recently, several theorists have suggested that this view should be extended to claim that ill-being consists in getting what you are averse to. I argue that both of these paradigmatic claims are false. As I show, desire and aversion are indeed both relevant to well-being and ill-being—in fact, perhaps surprisingly, each attitude has unique effects on both our well-being and ill-being. However, these effects are a matter of the (...) unique feelings desire and aversion produce. The paradigmatic desire satisfactionist approach—and, I argue, a surprisingly wide variety of desire satisfactionist views—cannot properly capture the relevance of these feelings, and thus the relevance of desire and aversion, to well-being and ill-being, and should therefore be abandoned. (shrink)

Tolerance is generally regarded as an unqualified achievement of the modern West. Emerging in early modern Europe to defuse violent religious conflict and reduce persecution, tolerance today is hailed as a key to decreasing conflict across a wide range of other dividing lines-- cultural, racial, ethnic, and sexual. But, as political theorist Wendy Brown argues in Regulating Aversion, tolerance also has dark and troubling undercurrents. Dislike, disapproval, and regulation lurk at the heart of tolerance. To tolerate is not to (...) affirm but to conditionally allow what is unwanted or deviant. And, although presented as an alternative to violence, tolerance can play a part in justifying violence--dramatically so in the war in Iraq and the War on Terror. Wielded, especially since 9/11, as a way of distinguishing a civilized West from a barbaric Islam, tolerance is paradoxically underwriting Western imperialism. Brown's analysis of the history and contemporary life of tolerance reveals it in a startlingly unfamiliar guise. Heavy with norms and consolidating the dominance of the powerful, tolerance sustains the abjection of the tolerated and equates the intolerant with the barbaric. Examining the operation of tolerance in contexts as different as the War on Terror, campaigns for gay rights, and the Los Angeles Museum of Tolerance, Brown traces the operation of tolerance in contemporary struggles over identity, citizenship, and civilization. (shrink)

While agreeing with the main conclusion of Dominic Wilkinson and colleagues (Wilkinson, Butcherine, and Savulescu 2019), namely, that there is no moral difference between treatment withholding and withdrawal as such, we wish to criticize their approach on the basis that it treats the widespread acceptance of withdrawal aversion (WA) as a cognitive bias. Wilkinson and colleagues understand WA as “a nonrational preference for withholding (WH) treatment over withdrawal (WD) of treatment” (22). They treat WA as a manifestation of loss (...) aversion and refer to Kahneman and colleagues (1991), which defined this effect as follows: “the disutility of giving up an object is greater that the utility associated with acquiring it” (194). In a previous work, Wilkinson and Savulescu understood nonequivalence between treatment withholding and withdrawal as a reflection of slightly different, although related, phenomena: status quo bias or omission bias (Wilkinson and Savulescu 2012, 130–131). In neither of these two papers do they describe precisely the relation between these well-known psychological effects and WA, nor do they explain why they treat these effects as examples of nonrational preferences, despite the fact that these issues have been the subject of wide-ranging discussions on the intersection of psychology, economy, and philosophy. (shrink)

Critical race theorists and standpoint epistemologists argue that agents who are members of dominant social groups are often in a state of ignorance about the extent of their social dominance, where this ignorance is explained by these agents' membership in a socially dominant group (e.g., Mills 2007). To illustrate this claim bluntly, it is argued: 1) that many white men do not know the extent of their social dominance, 2) that they remain ignorant as to the extent of their dominant (...) social position even where this information is freely attainable, and 3) that this ignorance is due in part to the fact that they are white men. We argue that on Buchak's (2010, 2013) model of risk averse instrumental rationality, ignorance of one's privileges can be rational. This argument yields a new account of elite-group ignorance, why it may occur, and how it might be alleviated. (shrink)

I argue that, insofar as we endorse the general idea that desires play an important role in well-being, we ought to believe that their significance for well-being is derived from a pair of more fundamental attitudes: attraction and aversion. Attraction has wholly positive significance for well-being, and aversion has wholly negative significance for well-being. Desire satisfaction and frustration have significance for well-being insofar as the relevant desires involve some combination of attraction and aversion. I defend these claims (...) by illustrating how our desires can be asymmetrical. They can have greater positive than negative significance for well-being, or vice versa. (shrink)

In this study, I draw on upper echelons theory to empirically examine whether a credit union CEO’s gender and political ideology influence their firm’s lending decisions. Interestingly, credit unions led by female CEOs are not necessarily more risk averse than a male CEO, as gender’s effect on risk aversion is shown to be conditional on one’s political ideology. This reflects the similar ways the two characteristics (gender and conservatism) relate to one’s risk preferences. However, these characteristics are not interchangeable, (...) as CEOs’ social preferences differ along these dimensions. Credit unions led by conservative CEOs are shown to place less emphasis on lending to historically disadvantaged applicants than their liberal counterparts, however, there is little difference observed based on a CEO’s gender. Together, these findings suggest that a CEO’s revealed preferences based on their ideology are important to understanding variation in lenders’ decision-making. (shrink)

We investigate risk attitudes when the underlying domain of payoffs is finite and the payoffs are, in general, not numerical. In such cases, the traditional notions of absolute risk attitudes, that are designed for convex domains of numerical payoffs, are not applicable. We introduce comparative notions of weak and strong risk attitudes that remain applicable. We examine how they are characterized within the rank-dependent utility model, thus including expected utility as a special case. In particular, we characterize strong comparative risk (...) aversion under rank-dependent utility. This is our main result. From this and other findings, we draw two novel conclusions. First, under expected utility, weak and strong comparative risk aversion are characterized by the same condition over finite domains. By contrast, such is not the case under non-expected utility. Second, under expected utility, weak comparative risk aversion is characterized by the same condition when the utility functions have finite range and when they have convex range. By contrast, such is not the case under non-expected utility. Thus, considering comparative risk aversion over finite domains leads to a better understanding of the divide between expected and non-expected utility, more generally, the structural properties of the main models of decision-making under risk. (shrink)

Daniel Ellsberg presented in Ellsberg (The Quarterly Journal of Economics 75:643–669, 1961) various examples questioning the thesis that decision making under uncertainty can be reduced to decision making under risk. These examples constitute one of the main challenges to the received view on the foundations of decision theory offered by Leonard Savage in Savage (1972). Craig Fox and Amos Tversky have, nevertheless, offered an indirect defense of Savage. They provided in Fox and Tversky (1995) an explanation of Ellsberg’s two-color problem (...) in terms of a psychological effect: ambiguity aversion. The ‘comparative ignorance’ hypothesis articulates how this effect works and explains why it is important to an understanding of the typical pattern of responses associated with Ellsberg’s two-color problem. In the first part of this article we challenge Fox and Tversky’s explanation. We present first an experiment that extends Ellsberg’s two-color problem where certain predictions of the comparative ignorance hypothesis are not confirmed. In addition the hypothesis seems unable to explain how the subjects resolve trade-offs between security and expected pay-off when vagueness is present. Ellsberg offered an explanation of the typical behavior elicited by his examples in terms of these trade-offs and in section three we offer a model of Ellsberg’s trade-offs. The model takes seriously the role of imprecise probabilities in explaining Ellsberg’s phenomenon. The so-called three-color problem was also considered in Fox and Tversky (1995). We argue that Fox and Tversky’s analysis of this case breaks a symmetry with their analysis of the two-color problem. We propose a unified treatment of both problems and we present a experiment that confirms our hypothesis. (shrink)

If a doctor is trying to decide whether or not to provide a medical treatment, does it matter ethically whether that treatment has already been started? Health professionals sometimes find it harder to stop a treatment (withdraw) than to refrain from starting the treatment (withhold). But does that feeling correspond to an ethical difference? In this article, we defend equivalence—the view that withholding and withdrawal of treatment are ethically equivalent when all other factors are equal. We argue that preference for (...) withholding over withdrawal could represent a form of cognitive bias—withdrawal aversion. Nevertheless, we consider whether there could be circumstances in which there is a moral difference. We identify four examples of conditional nonequivalence. Finally, we reflect on the moral significance of diverging intuitions and the implications for policy. We propose a set of practical strategies for helping to reduce bias in end-of-life decision making, including the equivalence test. (shrink)

This article argues that Lara Buchak’s risk-weighted expected utility (REU) theory fails to offer a true alternative to expected utility theory. Under commonly held assumptions about dynamic choice and the framing of decision problems, rational agents are guided by their attitudes to temporally extended courses of action. If so, REU theory makes approximately the same recommendations as expected utility theory. Being more permissive about dynamic choice or framing, however, undermines the theory’s claim to capturing a steady choice disposition in the (...) face of risk. I argue that this poses a challenge to alternatives to expected utility theory more generally. (shrink)

The veil of ignorance argument was used by John C. Harsanyi to defend Utilitarianism and by John Rawls to defend the absolute priority of the worst off. In a recent paper, Lara Buchak revives the veil of ignorance argument, and uses it to defend an intermediate position between Harsanyi's and Rawls' that she calls Relative Prioritarianism. None of these authors explore the implications of allowing that agent's behind the veil are averse to ambiguity. Allowing for aversion to ambiguity---which is (...) both the most commonly observed and a seemingly reasonable attitude to ambiguity---however supports a version of Egalitarianism, whose logical form is quite different from the theories defended by the aforementioned authors. Moreover, it turns out that the veil of ignorance argument neither supports standard Utilitarianism nor Prioritarianism unless we assume that rational people are insensitive to ambiguity. (shrink)

We consider bargaining situations where two players evaluate outcomes with reference-dependent utility functions, analyzing the effect of differing levels of loss aversion on bargaining outcomes. We find that as with risk aversion, increasing loss aversion for a player leads to worse outcomes for that player in bargaining situations. An extension of Nash's axioms is used to define a solution for bargaining problems with exogenous reference points. Using this solution concept we endogenize the reference points into the model (...) and find a unique solution giving reference points and outcomes that satisfy two reasonable properties, which we predict would be observed in a steady state. The resulting solution also emerges in two other approaches, a strategic (non-cooperative) approach using Rubinstein's (1982) alternating offers model and a dynamic approach in which we find that even under weak assumptions, outcomes and reference points converge to the steady state solution from any non-equilibrium state. (shrink)

The twenty-first century has brought a renewed interest in democratic theory and practices, creating a complicated relationship between time-honoured democratic traditions and new forms of political participation. Reflecting on this interplay between tradition and innovation, Aletta J. Norval offers fresh insights into the global complexities of the formation of democratic subjectivity, the difficult emergence and articulation of political claims, the constitution of democratic relations between citizens and the deepening of our democratic imagination. Aversive Democracy draws inspiration from a critical engagement (...) with deliberative and post-structuralist models of democracy, whilst offering a distinctive reading inspired by contemporary work on the later Wittgenstein. This is a creative and insightful work which reorients democratic theory, elucidating the character of the commitments we engage in when we participate in democratic life together. (shrink)

What we pay attention to is influenced by both reward learning and aversive conditioning. Although early attention tends to be biased toward aversively conditioned stimuli, sustained ignoring of such stimuli is also possible. How aversive conditioning influences how a person chooses to search, or the strategic control of attention, has not been explored. In the present study, participants learned an association between a colour and an aversive outcome during a training phase, and in a subsequent test phase searched for one (...) of two targets presented on each trial; one target was rendered in the aversively conditioned colour (CS+) and the other in a neutral colour (CS-). Given the distribution of colour stimuli in the search array, it was more optimal to search for and report a target in one of the two colours on some trials. Our results demonstrate that participants were biased away from the CS+ target, which resulted in non-optimal search on some trials. Surprisingly, rather than accentuate this bias, greater state anxiety was associated with a stronger tendency to find and report the CS+ target. Our findings have implications for our understanding of the learning-dependent control of attention and abnormal attentional biases observed in high-anxious individuals. (shrink)

Wakker (Theory Decis 29:119–132, 1990) proved that the rank-dependent utility model is a special case of Choquet expected utility model. Invoking this result and applying the certainty equivalent reduction procedure, this paper shows that risk aversion in the rank-dependent utility model implies ambiguity aversion in the corresponding Choquet expected utility model. Consequently, the pattern of choice depicted by Ellsberg’s experiments and, more generally, preference for evidence to support their beliefs is an expression of decision makers’ risk aversion. (...) In addition, the paper introduces a new procedure of updating capacities by the application of Bayes rule that smooth ambiguity aversion may also be regarded as risk aversion. (shrink)

We consider a situation where an individual is facing an uncertain situation, but may costly alter his knowledge of the uncertainties. We study in this context how risk aversion may modify the individual search behavior. We consider a one-armed bandit problem (where one arm is safe and the other is risky) and study how the agent risk aversion can change the sequence of arms selected. The main result is that when the utility function is more concave, the agent (...) has more chances to select the safe arm. We also discuss how search is affected by risk aversion. (shrink)

Can it be rational to be risk-averse? It seems plausible that the answer is yes—that normative decision theory should accommodate risk aversion. But there is a seemingly compelling class of arguments against our most promising methods of doing so. These long-run arguments point out that, in practice, each decision an agent makes is just one in a very long sequence of such decisions. Given this form of dynamic choice situation, and the (Strong) Law of Large Numbers, they conclude that (...) those theories which accommodate risk aversion end up delivering the same verdicts as risk-neutral theories in nearly all practical cases. If so, why not just accept a simpler, risk-neutral theory? The resulting practical verdicts seem to be much the same. In this paper, I show that these arguments do not in fact condemn those risk-aversion-accommodating theories. Risk aversion can indeed survive the long run. (shrink)

We call a decision maker risk averse for losses if that decision maker is risk averse with respect to lotteries having alternatives below a given reference alternative in their support. A two-person bargaining solution is called invariant under risk aversion for losses if the assigned outcome does not change after correcting for risk aversion for losses with this outcome as pair of reference levels, provided that the disagreement point only changes proportionally. We present an axiomatic characterization of the (...) Nash bargaining solution based on this condition, and we also provide a decision-theoretic characterization of the concept of risk aversion for losses. (shrink)

According to the original Ellsberg (1961) examples there is uncertainty version if the decision maker prefers to bet on an urn of known composition rather than on an urn of unknown composition. According to another definition (Schmeidler, 1989), there is uncertainty aversion if any convex combination of two acts is preferred to the least favorable of these acts. We show that these two definitions differ: while the first one truly refers to uncertainty aversion, the second one refers to (...) aversion to increasing uncertainty. Besides, with reference to Choquet Expected Utility theory, uncertainty aversion means that there exists the core of a capacity, while aversion to increasing uncertainty means that the capacity is convex. Consequently, aversion to increasing uncertainty implies uncertainty aversion, but the opposite does not hold. We also show that a completely analogous situation holds for the case of risk and we define a set of risk and uncertainty premiums according to the previous analysis. (shrink)

In this paper, we consider the composition of an optimal portfolio made of two dependent risky assets. The investor is first assumed to be a risk-averse expected utility maximizer, and we recover the existing conditions under which all these investors hold at least some percentage of their portfolio in one of the assets. Then, we assume that the decision maker is not only risk-averse, but also prudent and we obtain new minimum demand conditions as well as intuitively appealing interpretations for (...) them. Finally, we consider the general case of investor’s preferences exhibiting risk apportionment of any order and we derive the corresponding minimum demand conditions. As a byproduct, we obtain conditions such that an investor holds either a positive quantity of one of the assets or a proportion greater than 50 %. (shrink)

A moderately risk averse person may turn down a 50/50 gamble that either results in her winning $200 or losing $100. Such behaviour seems rational if, for instance, the pain of losing $100 is felt more strongly than the joy of winning $200. The aim of this paper is to examine an influential argument that some have interpreted as showing that such moderate risk aversion is irrational. After presenting an axiomatic argument that I take to be the strongest case (...) for the claim that moderate risk aversion is irrational, I show that it essentially depends on an assumption that those who think that risk aversion can be rational should be skeptical of. Hence, I conclude that risk aversion need not be irrational. (shrink)

We make the case for training AIs to be risk-averse in resources — specifically, to treat resources as having diminishing marginal utility. These AIs would (for example) choose $40 for sure over a half-chance of $100 and a half-chance of $0. We argue that risk aversion can preserve AIs’ usefulness in the event that they turn out aligned, and that it provides an extra line of defense in the event that AIs turn out misaligned: misaligned but risk-averse AIs would (...) prefer a higher chance of modest payments to a lower chance of successful rebellion, so in many circumstances we could pay these AIs not to rebel against us. We sketch out some possible methods of training AIs to be risk-averse, and we give reasons to be cautiously optimistic about these methods’ success. The main reasons are that risk aversion is a broad target and easy to reward accurately. Overall, risk aversion seems like a promising line of defense against threats from misaligned AI. Frontier AI companies should consider trying to make their AIs risk-averse. (shrink)

Experimental results on the Ellsberg paradox typically reveal behavior that is commonly interpreted as ambiguity aversion. The experiments reported in the current paper find the objective probabilities for drawing a red ball that make subjects indifferent between various risky and uncertain Ellsberg bets. They allow us to examine the predictive power of alternative principles of choice under uncertainty, including the objective maximin and Hurwicz criteria, the sure-thing principle, and the principle of insufficient reason. Contrary to our expectations, the principle (...) of insufficient reason performed substantially better than rival theories in our experiment, with ambiguity aversion appearing only as a secondary phenomenon. (shrink)

This research examines the moderating role of regret aversion in reason-based choice. Earlier research has shown that regret aversion and reason-based choice effects are linked through a common emphasis on decision justification, and that a simple manipulation of regret salience can eliminate the decoy effect, a well-known reason-based choice effect. We show here that the effect of regret salience varies in theory-relevant ways from one reason-based choice effect to another. For effects such as the select/reject and decoy effect, (...) both of which were independently judged to be unreasonable bases for deciding, regret salience eliminated the effect. For the most-important attribute effect that is judged to be normatively acceptable, however, regret salience amplified the effect. Anticipated self-blame regret and perceived decision justifiability consistently predicted preferences and thus offer a parsimonious account of both attenuation and amplification of these reason-based choice effects. (shrink)

In multi-armed bandit problems, information acquired from experimentation is valuable because it tells the agent whether to select a particular option again in the future. This article tests whether people undervalue this information because they are ambiguity averse, or have a distaste for uncertainty about the average quality of each alternative. It is shown that ambiguity averse agents have lower than optimal Gittins indexes, appearing to undervalue information from experimentation, but are willing to pay more than ambiguity neutral agents to (...) learn the true mean of the payoff distribution, appearing to overvalue objectively given information. This prediction is tested with a laboratory experiment that elicits a Gittins index and a willingness to pay on six two-armed bandits. Consistent with the predictions of ambiguity aversion, the Gittins indexes are significantly lower than optimal and willingnesses to pay are significantly higher than optimal. (shrink)

Diagnostic tests allow better informed medical decisions when there is uncertainty about a patient’s health status and, therefore, about the desirability to undertake treatment. This paper studies the relation between the expected value of diagnostic information and a patient's risk aversion. We show that the ex ante value of diagnostic information increases with risk aversion for diseases with low prevalence, but decreases with risk aversion for diseases with high prevalence. On the other hand, the ex post value (...) of diagnostic information always increases with the patient's degree of risk aversion. (shrink)

In this paper, we discuss the transition from secure employment to risky self-employment caused by a small increase in wealth. Building on the apportioning risk literature, we prove that the transition from secure employment to risky entrepreneurship is based on a measure of the difference between the strength of downside risk aversion and the strength of risk aversion. This result highlights the idea that using the behavioral approach of risky lotteries to study entrepreneurship can produce different results from (...) the traditional economic theory of entrepreneurship, which can have policy implications that must be considered with caution. (shrink)

Maximum-likelihood updating is a well-known approach for extending static ambiguity sensitive preferences to dynamic set-ups. This paper develops an example in which MLU induces an ambiguity averse maxmin expected utility decision-maker to prefer a bet on an ambiguous over a risky urn and be more willing to bet on the ambiguous urn compared to an subjective expected utility decision-maker. This is challenging, since prior to observing draws from the urns, the MEU decision-maker actually preferred the risky over the ambiguous bet (...) and was less willing to bet on the ambiguous urn than the SEU decision-maker. The identified switch in betting preferences is not due to a violation of dynamic consistency or consequentialism. Rather, it results from MLU’s selection of extreme priors, causing a violation of the stability of set inclusion over the course of the updating process. (shrink)

The article presents an Internet experiment where subjects sequentially bid for basic gifts and binary-lotteries on these gifts in incentive compatible Vickrey auctions. Subjects exhibit uniformly pessimistic prize-weighting in spite of precautions to reduce suspicion and prohibit collusion. The bids for lotteries are close to the minimal payable value, even when the probability of obtaining a better prize is larger than 50%. Prize-weighting becomes even more conservative as the distance in value of payable prizes increases. The twofold aversive affect appears (...) for three distinct groups of students; we demonstrate, however, that the same subjects overweight small win-probabilities in standard binary-choice. (shrink)

Antisocial punishment—punishment of pro-social cooperators—has shown to be detrimental for the efficiency of informal punishment mechanisms in public goods games. The motives behind antisocial punishment acts are not yet well understood. This article shows that inequality aversion predicts antisocial punishment in public goods games with punishment. The model by Fehr and Schmidt (Q J Econ 114(3): 817–868, 1999) allows to derive conditions under which antisocial punishment occurs. With data from three studies on public goods games with punishment I evaluate (...) the predictions. A majority of the observed antisocial punishment acts are not compatible with inequality aversion. These results suggest that the desire to equalize payoffs is not a major determinant of antisocial punishment. (shrink)

Engaging in self-narrative is often touted as a powerful antidote to the bad effects of illness. However, there are various examples of what may broadly be termed “aversion” to illness narrative. I group these into three kinds: aversion to certain types of illness narrative; aversion to illness narrative as a whole; and aversion to illness narrative as an essentially therapeutic endeavor. These aversions can throw into doubt the advantages claimed for the illness narrator, including the key (...) benefits of repair to the damage illness does to identity and life-trajectory. Underlying these alleged benefits are two key presuppositions: that it is the whole of one’s life that is narratively unified, and that one’s identity is inextricably bound up with narrative. By letting go of these assumptions, illness narrative advocates can respond to the challenges of narrative aversions. (shrink)

In the Gorgias, Plato has Polus ask Socrates if he would rather suffer injustice than perform it. Socrates’ response is justly famous, affirming a view that Polus himself finds incredible, and one that even contemporary readers find difficult to credit: “for my part, I would prefer neither, but if it had to be one or the other, I would choose to suffer rather than do what is unjust”. In this paper, we take up the part of Socrates’ response that Polus (...) never engages and that has also been completely neglected by contemporary scholars, namely, Socrates’ explicit aversion to being a victim of injustice. We show that this same aversion—though one not nearly as strong as his aversion to doing injustice—appears in several texts, and we argue that the best explanation of such an aversion derives from two important features of Socratic philosophy, both of which have only recently been recognized in Socratic scholarship: his virtue intellectualism, which conceives of virtue as a kind of craft that can be achieved in different degrees, and his conception of moral psychology, which allows for non-rational influences on how we perform the cognitive functions required for proper deliberation. (shrink)

Coherent-ambiguity aversion is defined within the smooth-ambiguity model as the combination of choice-ambiguity and value-ambiguity aversion. Five ambiguous decision tasks are analyzed theoretically, where an individual faces two-stage lotteries with binomial, uniform, or unknown second-order probabilities. Theoretical predictions are then tested through a 10-task experiment. In tasks 1–5, risk aversion is elicited through both a portfolio choice method and a BDM mechanism. In tasks 6–10, choice-ambiguity aversion is elicited through the portfolio choice method, while value-ambiguity (...) class='Hi'>aversion comes about through the BDM mechanism. The behavior of over 75 % of classified subjects is in line with the KMM model in all tasks 6–10, independent of their degree of risk aversion. Furthermore, the percentage of coherent-ambiguity-averse subjects is lower in the binomial than in the uniform and in the unknown treatments, with only the latter difference being significant. The most part of coherent-ambiguity-loving subjects show a high risk aversion. (shrink)

This article presents the results of a survey designed to test, with economically sophisticated participants, Ellsberg’s ambiguity aversion hypothesis, and Smithson’s conflict aversion hypothesis. Based on an original sample of 78 professional actuaries (all members of the French Institute of Actuaries), this article provides empirical evidence that ambiguity (i.e. uncertainty about the probability) affect insurers’ decision on pricing insurance. It first reveals that premiums are significantly higher for risks when there is ambiguity regarding the probability of the loss. (...) Second, it shows that insurers are sensitive to sources of ambiguity. The participants indeed, charged a higher premium when ambiguity came from conflict and disagreement regarding the probability of the loss than when ambiguity came from imprecision (imprecise forecast about the probability of the loss). This research thus documents the presence of both ambiguity aversion and conflict aversion in the field of insurance, and discuses economic and psychological rationales for the observed behaviours. (shrink)

Is more information always better? Or are there some situations in which more information can make us worse off? Good (1967) argues that expected utility maximizers should always accept more information if the information is cost-free and relevant. But Good's argument presupposes that you are certain you will update by conditionalization. If we relax this assumption and allow agents to be uncertain about updating, these agents can be rationally required to reject free and relevant information. Since there are good reasons (...) to be uncertain about updating, rationality can require you to prefer ignorance. (shrink)

We show how the endowment effect can be interpreted in terms of ambiguity aversion. Agents take status quo as their reference point, relative to which they evaluate potential trades. The value of exchanged goods is ambiguous, represented by a set of probability distributions over possible values. Agents are ambiguity averse, modeled as maxmin expected utility maximisers. This characteristic leads a seller to focus on the case of selling a high value good and leads a buyer to focus on the (...) case of buying a low value good. Consequently, the seller’s willingness to accept (WTA) is inflated and the buyer’s willingness to pay (WTP) is deflated, producing an endowment effect. Assuming that agents incorporate new information via Bayesian updating of the set of priors, we show that information decreases the WTP-WTA gap. In this way our model can account for the known facts that the endowment effect is mitigated by physical contact with the good, decreasing in experience, larger for non-market goods, and more dependent on possession of the good than on ownership. (shrink)

Schopenhauer’s case for pessimism turns on a claim about desire. All desire, Schopenhauer suggests, consists in aversion rather than attraction: we are pushed away from states experienced as bad rather than pulled toward states experienced as good. Despite this claim’s importance, most commentators view it as an unsupported assertion. I argue that this consensus is mistaken: Schopenhauer does not leave his theory of desire without defense. This defense consists in a far-reaching reductive argument. Everyone grants that some desires are (...) aversive: the hungry person seeks to eliminate their distressing hunger, the sexually frustrated person seeks to eliminate their distressing frustration, and the bored person seeks to eliminate their distressing boredom. In order to establish that all desires are aversive, Schopenhauer argues that their apparent diversity is an illusion: at bottom, there are only many different ways of expressing the same small set of aversive desires listed in the previous sentence. (shrink)

We present an axiomatic model of preferences over menus that is motivated by three assumptions. First, the decision maker is uncertain ex ante (i.e., at the time of choosing a menu) about her ex post (i.e., at the time of choosing an option within her chosen menu) preferences over options, and she anticipates that this subjective uncertainty will not resolve before the ex post stage. Second, she is averse to ex post indecisiveness (i.e., to having to choose between options that (...) she cannot rank with certainty). Third, when evaluating a menu she discards options that are dominated (i.e., inferior to another option whatever her ex post preferences may be) and restricts attention to the undominated ones. Under these assumptions, the decision maker has a preference for commitment in the sense of preferring menus with fewer undominated alternatives. We derive a representation in which the decision maker’s uncertainty about her ex post preferences is captured by means of a subjective state space, which in turn determines which options are undominated in a given menu, and in which the decision maker fears, whenever indecisive, to choose an option that will turn out to be the worst (undominated) one according to the realization of her ex post preferences. (shrink)

Health security has become a popular way of justifying efforts to control catastrophic threats to public health. Unfortunately, there has been little analysis of the concept of health security, nor the relationship between health security and other potential aims of public health policy. In this paper I develop an account of health security as an aversion to risky policy options. I explore three reasons for thinking risk avoidance is a distinctly worthwhile aim of public health policy: that security is (...) intrinsically valuable, that it is necessary for social planning and that it is an appropriate response to decision-making in contexts of very limited information. Striking the right balance between securing and maximizing population health thus requires a substantive, and hitherto unrecognized, value judgment. Finally, I critically evaluate the current health security agenda in light of this new account of the concept and its relationship to the other aims of public health policy. (shrink)

Loss aversion can occur in riskless and risky choices. We present novel evidence on both in a non-student sample (660 randomly selected customers of a car manufacturer). We measure loss aversion in riskless choice in endowment effect experiments within and between subjects and find similar levels of average loss aversion in both. The subjects of the within study also participate in a simple lottery choice task which arguably measures loss aversion in risky choices. We find substantial (...) heterogeneity in both measures of loss aversion. Loss aversion in riskless choice and loss aversion in risky choice are strongly positively correlated, but on average riskless loss aversion is higher than risky loss aversion. We find that in both choice tasks, loss aversion increases in age, income, and wealth, and decreases in education. Our results provide novel supportive input to the debate about the reality of loss aversion. (shrink)

Women often experience novel food aversions and cravings during pregnancy. These appetite changes have been hypothesized to work alongside cultural strategies as adaptive responses to the challenges posed by pregnancy (e.g., maternal immune suppression). Here, we report a study that assessed whether data from an indigenous population in Fiji are consistent with the predictions of this hypothesis. We found that aversions focus predominantly on foods expected to exacerbate the challenges of pregnancy. Cravings focus on foods that provide calories and micronutrients (...) while posing few threats to mothers and fetuses. We also found that women who experience aversions to specific foods are more likely to crave foods that meet nutritional needs similar to those provided by the aversive foods. These findings are in line with the predictions of the hypothesis. This adds further weight to the argument that appetite changes may function in parallel with cultural mechanisms to solve pregnancy challenges. (shrink)

This article argues that Lara Buchak’s risk-weighted expected utility (REU) theory fails to offer a true alternative to expected utility theory. Under commonly held assumptions about dynamic choice and the framing of decision problems, rational agents are guided by their attitudes to temporally extended courses of action. If so, REU theory makes approximately the same recommendations as expected utility theory. Being more permissive about dynamic choice or framing, however, undermines the theory’s claim to capturing a steady choice disposition in the (...) face of risk. I argue that this poses a challenge to alternatives to expected utility theory more generally. (shrink)

A number of recent studies have documented rapid changes in behavioural sensory acuity induced by aversive learning in the olfactory and auditory modalities. The effect of aversive learning on the discrimination of low-level features in the visual system of humans remains unclear. Here, we used a psychophysical staircase procedure to estimate discrimination thresholds for oriented grating stimuli, before and after differential aversive learning. We discovered that when a target grating orientation was conditioned with an aversive loud noise, it subsequently led (...) to an improvement of discrimination acuity in nearly all subjects. However, no such change was observed in a control group conditioned to an orientation shifted by ±90° from the target. Our findings cannot be explained by contextual learning or sensitisation factors. The results converge with those reported in the olfactory modality and provide further evidence that early sensory systems can be rapidly modified by recently experienced reinforcement histories. (shrink)

The risk premium (conveniently normalized) is defined as the measure of risk aversion. This measure does not require any relevant assumption in the theory of choice under uncertainty except the existence of a certainty equivalent. In particular, the independence axiom is not required. The measure of risk aversion of an action is provided not only for the case with one commodity and two consequences but also for the case with many commodities and consequences. The measure of mean risk (...) aversion of all actions with given consequences is introduced and the local measure of risk aversion is obtained by making all these consequences approach the consequence under consideration. This measure is demonstrated to be zero when the von Neumann-Morgenstern utility function exists. In this case a measure of risk aversion of the second order is introduced, which turns out to be equal to the Arrow-Pratt absolute index when there is only one commodity and similar to the generalized measures proposed by several authors when there are many commodities and two consequences. (shrink)

Different intertriai intervals (ITIs) may influence the aversiveness of the goal area in aversive training with one-way procedures. That possibility was explored. Albino rats were given 20 shock-escape runway trials with short or long ITIs followed by 5 extinction test trials with goalbox measures for latency to eat, climb out, and move onto a wood floor. Different measures produced different outcomes. “Time to eat” did not differentiate groups. Massed-trials animals were quicker to “move over” initially but slowed down over trials. (...) Spaced and massed procedures did not produce initial differences on “climb out,” but spaced-trials animals speeded up over trials and massed-trials animals slowed down. Results suggested that differences in ITIs did not generate major differences in levels of aversion in the “safe” area. ITI effects on performance may be due to differential effects on the conditioning process. (shrink)

We study how the optimal contract in team production is a¤ected when employees are averse to inequity in the sense described by Fehr and Schmidt (1999). By designing a reward scheme that creates inequity o¤ the desired equilibrium, the employer can induce employees to perform e¤ort at a lower total wage cost than when they are not inequity averse. We also show that the optimal output choice might change when employees are inequity averse. Finally, we show that an employer can (...) gain, and never lose, by designing a contract that accounts for inequity aversion, even if employees have standard preferences. (shrink)

The theoretical literature on vertical relationships usually assumes that beliefs about secret contracts take specific forms. In a recent paper, Eguia et al. (Games Econ Behav 109:465–483,2018) propose a new selection criterion that does not impose any restriction on beliefs. In this article, we extend their criterion by generalizing it to risk-averse retailers, and we show that risk aversion modifies the size of the belief subsets that support each equilibrium. We conduct an experiment which revisits that of Eguia et (...) al. (Games Econ Behav 109:465–483,2018). We design a new treatment effect on equilibrium selection depending on the retailers’ risk sensitivity. Experimental results confirm the treatment effect: the more sensitivity there is towards risk, the more the equilibrium played is consistent with passive beliefs. In addition, extending Eguia et al.’s (Games Econ Behav 109:465–483,2018) criterion to risk-averse retailers improves its predictive power on the equilibria played, especially for a population of retailers with moderate to extreme risk aversion. (shrink)