New Economics of Risk and Uncertainty Theory and Applications

In this book, the author presents a completely alternative theoretical framework that can serve as the basis for a new age of economic analysis under risk and uncertainty. The new theory extends and simplifies the current and recent results. For example, an endogenous theory is presented that overcomes the major shortcomings of both the expected utility and the rank-dependent models while it possesses the merits of both. As another example, a new definition of risk-aversion is discussed within the expected utility framework, where risk-aversion and diminishing marginal utility are not synonymous, and the (standard) statistical independence assumption is needless.