To price assets, consequently, the calculated expected values need to be adjusted for an investor's risk preferences (see also Sharpe ratio).
Unfortunately, the discounted rates would vary between investors and an individual's risk preference is difficult to quantify.
Expected utility hypothesis cannot explain the shift in risk preferences across the day if bettors integrate their wealth because the last race of the day is not fundamentally different than the first.
The democratic approach, championed by Paul Slovic, respects risk preferences as revealed by the availability market.
Clearly distinguished time preferences from risk preferences and temporal versus timeless uncertainty, while expounding results on savings and portfolio choices under uncertainty.
For example, in a series of studies, her research examines the distinct effects of fear, anger, and happiness on risk perception and risk preference.
Given the internal dynamics of the stock market nowadays-when so much trading is algorithmic rather than fundamental-even small changes in investors' risk preferences can translate into big price moves.
Depending on the risk preferences of the agents, a simple division of the contested resource according to a settlement can be envisioned.
The required risk premium is dependent on the risk preferences of the lender.
The manufacturer is likely to prefer one or the other depending upon the nature of uncertainty and the risk preferences of retailers.