A μ-σ-Risk Aversion Paradox and Wealth Dependent Utility

We report a surprising property of --preferences: the assumption of nonincreasing relative risk aversion implies the optimal portfolio being riskless. We discuss a solution of that paradox using wealth dependent utility functions in detail. Using the revealed preference theory we show that (general, i.e. not necessary -) wealth dependent utility functions can be characterized by Wald's axiom.     

A Paretian liberal dilemma without collective rationality

This note proposes a principle of liberalism which is a simple and plausible variant of Sen's principle of minimal liberalism. The former principle is shown to be incompatible with the weak Pareto principle; and this impossibility result is not dependent on the preference-aggregating rule being restricted by any collective rationality condition.     

A paradox in decision theory and some experimental results: The relative nature of decisions

A simple two-choice single outcome valued decision under risk is presented which should show up the limitations in the classical approach of von Neumann, its extensions and its alternatives. An empirical testing of this hypothesis strongly supports this criticism. A rationale for explaining the apparent irrational decision is put forward and the case is made for understanding the relative nature of decision choices especially when multi-criteria are involved.     

Pascal’s and Tabarrok’s Wagers

In a recent paper A. Tabarrok [Believe in Pascal’s Wager? Have I Got a Deal for You!, Theory and Decision 48, 123--128, 2000] argued that a believer who accepts Pascal’s Wager should in addition accept payment of any given fee in return for a given increase in the probability of reaching God. However the conclusion is obtained from manipulations of infinities which are not valid in an expected utility model. In this note, an alternative model is formulated in which Tabarrok’s conclusion can be obtained.     

Expected utility, μ-σ preferences,and linear distribution classes: A further result

This article is an extension of Meyer and Sinn's results on the representation of arbitrary von Neumann-Morgenstern functions in - space when the probability distributions to be compared belong to a linear distribution class. It shows that, when absolute risk aversion decreases, stays constant, or increases not too fast, an increase in , given , increases the indifference curve slope: increased riskiness increases the required marginal compensation for risk when risk is measured by the standard deviation of wealth or income.I gratefully acknowledge useful comments by Wolfgang Buchholz, Kai Konrad, Jack Meyer, Hans Schneeweiß, Dominique Thon, and Bengt Arne Wickström.     

A Comparison of Some Distance-Based Choice Rules in Ranking Environments

We discuss the relationships between positional rules (such as plurality and approval voting as well as the Borda count), Dodgsons, Kemenys and Litvaks methods of reaching consensus. The discrepancies between methods are seen as results of different intuitive conceptions of consensus goal states and ways of measuring distances therefrom. Saaris geometric methodology is resorted to in the analysis of the consensus reaching methods.     

Comparative accuracy of value solutions in non-sidepayment games with empty core

This article reports a test of the predictive accuracy of solution concepts in cooperative non-sidepayment n-person games with empty core. Six solutions were tested. Three of these were value solutions (i.e., -transfer value, -transfer nucleolus, and -transfer disruption value) and three were equilibrium solutions (deterrence set, stable set, and imputation set). The test was based on a laboratory experiment utilizing 5-person, 2-choice normal form games with empty core; other related data sets were also analyzed. Goodness-of-fit results based on discrepancy scores show that the three value solutions are about equally accurate in predicting outcomes, and that all three are substantially more accurate than the other solutions tested.     

Bribes,power, and managerial control in corporate voting games

Proxy fights have received comparatively little attention relative to the more popular methods for corporate control transfer: merger and tender offers. This paper presents an analytic model of the proxy contest as a cooperative game with four players: management, passive shareholders, insurgent shareholders and a trust fund. The power of the players and the effectiveness of certain managerial actions is discussed.