A theory of risk
Journal of Mathematical PsychologyPublished 1 October 1970Open access
Alexander Pollatsek, Amos Tversky
Citations203
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Abstract
A psychological theory of perceived risk is developed. The theory is formulated in terms of an ordering of options, conceived of as probability distributions with respect to risk. It is shown that, under the assumptions of the theory, the risk of an option is expressible as a linear combination of its mean and variance. The relationships to other theories of risk and preference are explored.
Keywords
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