3 ms·
It could also be that the utility of money is perceived to be logarithic, and then it depends on the base the individual uses in the personal utitlity function
by fhars 15y ago
It could also be that the utility of money is perceived to be logarithic, and then it depends on the base the individual uses in the personal utitlity function (which probably depends on the persons net worth) which choice is rational. For example,
ln 900 > 0.9 * ln 1000.
- nl 15y agoThis may well be true. But the point is that research has show that almost all people have this bias that makes them much more risk adverse when avoiding losses than when they don't already have the money. We can speculate a lot on the reasons, but that speculation isn't tested yet.