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Learning and Risk Aversion

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  • Carlos Oyarzun
  • Rajiv Sarin

Abstract

We study how learning shapes behavior towards risk when individuals are not assumed to know, or to have beliefs about, probability distributions. In any period, the behavior change induced by learning is assumed to depend on the action chosen and the payoff obtained. We characterize learning processes that, in expected value, increase the probability of choosing the safest actions and provide sufficient conditions for them to converge to the choices of risk averse expected utility maximizers. We provide a learning theoretic motivation for long run risk choices, such as those in expected utility theory with known payoff distributions.
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Suggested Citation

  • Carlos Oyarzun & Rajiv Sarin, 2005. "Learning and Risk Aversion," Levine's Bibliography 784828000000000482, UCLA Department of Economics.
    • Handle: RePEc:cla:levrem:784828000000000482
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    File URL: http://econweb.tamu.edu/rsarin/learningandriskaversion905.pdf
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    References listed on IDEAS

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    Cited by:

    1. Johannes G. Jaspersen & Richard Peter, 2017. "Experiential Learning, Competitive Selection, and Downside Risk: A New Perspective on Managerial Risk Taking," Organization Science, INFORMS, vol. 28(5), pages 915-930, October.
    2. Oyarzun, Carlos, 2014. "A note on absolutely expedient learning rules," Journal of Economic Theory, Elsevier, vol. 153(C), pages 213-223.
    3. Carlos Oyarzun & Johannes Ruf, 2009. "Monotone imitation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(3), pages 411-441, December.
    4. Oyarzun, Carlos & Ruf, Johannes, 2014. "Convergence in models with bounded expected relative hazard rates," Journal of Economic Theory, Elsevier, vol. 154(C), pages 229-244.
    5. Oyarzun, Carlos & Sanjurjo, Adam & Nguyen, Hien, 2017. "Response functions," European Economic Review, Elsevier, vol. 98(C), pages 1-31.

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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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