“Outside options and risk attitude” with Gregorio Curello and Mark Whitmeyer
We uncover a close link between outside options and risk attitude: when a decision-maker gains access to an outside option, her behaviour becomes less risk-averse, and conversely, any observed decrease of risk-aversion can be explained by an outside option having been made available. We characterise the comparative statics of risk-aversion, delineating how effective risk attitude (i.e. actual choice among risky prospects) varies with the outside option and with the decision-maker’s ‘true’ risk attitude. We prove that outside options are special: among transformations of a decision problem, those that amount to adding an outside option are the only ones that always reduce risk-aversion.
Date: 4 November 2025, 12:45
Venue: Nuffield College, New Road OX1 1NF
Venue Details: Butler Room
Speaker: Ludvig Sinander (University of Oxford)
Organising department: Department of Economics
Part of: Economic Theory Workshop
Booking required?: Not required
Audience: Members of the University only
Editor: Edward Valenzano