Abstract
In previous section we represented agent’s perceived risk by a measure that reflects the dispersion of his revenue stream. Although the dispersion of possible outcomes has been widely used as the measure of risk (Pratt 1964; Rothschild and Stiglitz 1970; Stiglitz 1974; Levy 1992; Fukunaga and Huffman 2009; Lewis and Bajari 2014) it fails to capture observable behavior in risky settings. In this section we extend our principal-agent analysis to risk-seeking agent. We note that there is an ongoing evaluation of risk attitudes in an attempt to explain peoples’ behavior when faced with risky choices. For instance Prospect Theory claims to offer a better model that covers discrepancies observed elsewhere (Kahneman and Tversky 1979; Tversky and Kahneman 1992).
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Zeng, S., Dror, M. (2016). Risk-Seeking Agent. In: Formulating Principal-Agent Service Contracts for a Revenue Generating Unit. SpringerBriefs in Operations Management. Springer, Cham. https://doi.org/10.1007/978-3-319-18672-6_5
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DOI: https://doi.org/10.1007/978-3-319-18672-6_5
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