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Discrete Arrow-Pratt indexes for risk and uncertainty
in Economic Theory, 72 (4)
Voir la revue «Economic Theory»
The Arrow–Pratt index, a gold standard in studies of risk attitudes, is not directly observable from choice data. Existing methods to measure it rely on parametric assumptions. We introduce a discrete Arrow–Pratt index, and its relative counterpart, that can be directly obtained from choices. Our approach is general: it is (i) non-parametric, (ii) applicable to both risk and uncertainty, (iii) and robust to probability transformation, non-additive beliefs and multiple priors. Our index can also
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be used to characterize various decision models through various simple consistency requirements. We analyze its properties and demonstrate how it can be measured.
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