Jointly radial and translation homothetic preferences: generalized constant risk aversion

The paper identifies the structural restrictions on preferences required for them to exhibit both translation homotheticity in particular direction and radial homotheticity. The results are illustrated by an application to an asset allocation problem in the absence of riskless asset.

Supermodularity and risk aversion

In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Stiglitz. (c) 2006 Elsevier B.V. All rights reserved.

Risk premiums and benefit measures for generalized-expected-utility theories

Standard tools for the analysis of economic problems involving uncertainty, including risk premiums, certainty equivalents and the notions of absolute and relative risk aversion, are developed without making specific assumptions on functional form beyond the basic requirements of monotonicity, transitivity, continuity, and the presumption that individuals prefer certainty to risk. Individuals are not required to display probabilistic sophistication. The approach relies on the distance and benefit functions to characterize preferences relative to a given state-contingent vector of outcomes. The distance and benefit functions are used to derive absolute and relative risk premiums and to characterize preferences exhibiting constant absolute risk aversion (CARA) and constant relative risk aversion (CRRA). A generalization of the notion of Schur-concavity is presented. If preferences are generalized Schur concave, the absolute and relative risk premiums are generalized Schur convex, and the certainty equivalents are generalized Schur concave.

Response to price and production risk: The case of Australian wheat

A model of Australian wheat grower supply response was specified under the constraints of price and yield uncertainty, risk aversion, partial adjustment, and quadratic costs. The model was solved to obtain area planted. The results of estimation indicate that risk arising from prices and climate have had a significant influence on producer decision making. The coefficient of relative risk aversion and short-run and long-run elasticities of supply with respect to price were calculated. Wheat growers' risk premium, expected at the start of the season for exposed price and yield risk, was 2.8 percent of revenue or 10.4 percent of profit as measured by producer surplus. (C) 2000 John Wiley & Sons, Inc.

Production under uncertainty and choice under uncertainty in the emergence of generalized expected utility theory

This paper presents a personal view of the interaction between the analysis of choice under uncertainty and the analysis of production under uncertainty. Interest in the foundations of the theory of choice under uncertainty was stimulated by applications of expected utility theory such as the Sandmo model of production under uncertainty. This interest led to the development of generalized models including rank-dependent expected utility theory. In turn, the development of generalized expected utility models raised the question of whether such models could be used in the analysis of applied problems such as those involving production under uncertainty. Finally, the revival of the state-contingent approach led to the recognition of a fundamental duality between choice problems and production problems.

The amygdaloid complex: Anatomy and physiology

A converging body of literature over the last 50 years has implicated the amygdala in assigning emotional significance or value to sensory information. In particular, the amygdala has been shown to be an essential component of the circuitry underlying fear-related responses. Disorders in the processing of fear-related information are likely to be the underlying cause of some anxiety disorders in humans such as posttraumatic stress. The amygdaloid complex is a group of more than 10 nuclei that are located in the midtemporal lobe. These nuclei can be distinguished both on cytoarchitectonic and connectional grounds. Anatomical tract tracing studies have shown that these nuclei have extensive intranuclear and internuclear connections. The afferent and efferent connections of the amygdala have also been mapped in detail, showing that the amygdaloid complex has extensive connections with cortical and subcortical regions. Analysis of fear conditioning in rats has suggested that long-term synaptic plasticity of inputs to the amygdala underlies the acquisition and perhaps storage of the fear memory. In agreement with this proposal, synaptic plasticity has been demonstrated at synapses in the amygdala in both in vitro and in vivo studies. In this review, we examine the anatomical and physiological substrates proposed to underlie amygdala function.

Background risk in generalized expected utility theory

In this paper, it is shown that, for a wide range of risk-averse generalized expected utility preferences, independent risks are complementary, contrary to the results for expected utility preferences satisfying conditions such as proper and standard risk aversion.

Potential demand for hedging by Australian wheat producers

The potential for hedging Australian wheat with the new Sydney Futures Exchange wheat contract is examined using a theoretical hedging model parametised from previous studies. The optimal hedging ratio for an 'average' wheat farmer was found to be zero under reasonable assumptions about transaction costs and based on previously published measures of risk aversion. The estimated optimal hedging ratios were found by simulation to be quite sensitive to assumptions about the degree of risk aversion. If farmers are significantly more risk averse than is currently believed, then there is likely to be an active interest in the new futures market.

Peripheral withdrawal recruits distinct central nuclei in morphine-dependent rats

This study examined if brain pathways in morphine-dependent rats are activated by opioid withdrawal precipitated outside the central nervous system. Withdrawal precipitated with a peripherally acting quaternary opioid antagonist (naloxone methiodide) increased Fos expression but caused a more restricted pattern of neuronal activation than systemic withdrawal (precipitated with naloxone which enters the brain). There was no effect on locus coeruleus and significantly smaller increases in Fos neurons were produced in most other areas. However in the ventrolateral medulla (A1/C1 catecholamine neurons), nucleus of the solitary tract (A2/C2 catecholamine neurons), lateral parabrachial nucleus, supramamillary nucleus, bed nucleus of the stria terminalis. accumbens core and medial prefrontal cortex no differences in the withdrawal treatments were detected. We have shown that peripheral opioid withdrawal can affect central nervous system pathways. Crown Copyright (C) 2001 Published by Elsevier Science Ltd. All rights reserved.

Blink startle modulation during anticipation of pleasant and unpleasant stimuli

The present research investigated blink startle modulation during the anticipation of pleasant, unpleasant, or neutral pictures. In Experiment 1 (N = 18), participants were presented with three different tone-picture pairings. Tones differed in pitch and were followed by pleasant, neutral or unpleasant pictures. Acoustic blink reflexes were elicited during some tones and during stimulus free intervals. Blink facilitation during tones that preceded pleasant and unpleasant pictures was larger than during the tone that preceded neutral pictures. Experiment 2 (N = 10) assessed whether this difference was due to a difference in the presentation frequency of the three conditions. No difference in blink facilitation between the conditions was found when pictures of flowers and mushrooms replaced the pleasant and unpleasant pictures, indicating that picture content was instrumental in causing the differential blink facilitation in Experiment 1. The results from Experiment 1 seem to indicate that startle modulation during the anticipation of pictorial material reflects the interest in or the arousal associated with the pictures rather than picture valence.

Price stabilization and the risk-averse firm

An analytically simple and tractable approach to firm-level welfare analysis of complete and partial mean-preserving price stabilization for producers with general risk-averse preferences facing a stochastic technology is developed. Necessary and sufficient conditions for price stabilization to be welfare enhancing are derived under different assumptions of the producer's preferences and the producer's technology. Existing stabilization results for the risk-averse firm are shown to be corollaries of these more general results.

Invariant risk attitudes

Concepts of constant absolute risk aversion and constant relative risk aversion have proved useful in the analysis of choice under uncertainty, but are quite restrictive, particularly when they are imposed jointly. A generalization of constant risk aversion, referred to as invariant risk aversion is developed. Invariant risk aversion is closely related to the possibility of representing preferences over state-contingent income vectors in terms of two parameters, the mean and a linearly homogeneous, translation-invariant index of riskiness. The best-known index with such properties is the standard deviation. The properties of the capital asset pricing model, usually expressed in terms of the mean and standard deviation, may be extended to the case of general invariant preferences. (C) 2003 Elsevier Inc. All rights reserved.

Increasing uncertainty: A definition

We present a definition of increasing uncertainty, in which an elementary increase in the uncertainty of any act corresponds to the addition of an 'elementary bet' that increases consumption by a fixed amount in (relatively) 'good' states and decreases consumption by a fixed (and possibly different) amount in (relatively) 'bad' states. This definition naturally gives rise to a dual definition of comparative aversion to uncertainty. We characterize this definition for a popular class of generalized models of choice under uncertainty.