Risk-Seeking Agent

Part of the SpringerBriefs in Operations Management book series (BRIEFSOPERMAN)


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).


Risk-seeking Agent Risky Settings Expected Utility Rate Optimal Service Capacity Penalty Rate 
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© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Eller College of ManagementUniversity of ArizonaTucsonUSA

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