A Comprehensive Analysis of the Subproportionality and Risk-Tolerance/Risk-Aversion Properties

This project proposes to systematically study two key properties central to non-Expected Utility (EU) decisionmaking models: subproportionality and changing patterns of risk tolerance with probabilities. Subproportionality reflects evidence that when facing a choice between a relatively high probability of a moderate prize and relatively low probability of a high prize, individuals are more likely to choose the latter alternative as both probabilities are scaled down. Changing patterns of risk tolerance reflects the classic finding that in choices between a certain amount and a risky lottery, choices often appear risk tolerant at low probabilities, and risk averse at high probabilities of winning in the risky lottery. Existing evidence on these two phenomena are largely derived from separate data sets with incomplete coverage of the relevant space of parameters. This project proposes to systematically investigate the entire space to deliver a more complete empirical foundation for theories of non-EU decisionmaking.