Paper: Outside options and risk attitude
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Ludvig Sinander
Sep 19, 2025, 6:35:18 AMSep 19
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Dear friends,
Gregorio Curello, Mark Whitmeyer and I have just completed a first draft of a paper uncovering a close relationship between outside options and risk attitude. We are very excited about this paper & think some of you may be interested. Comments very welcome!
https://arxiv.org/abs/2509.14732
Abstract: We uncover a close link between outside options and risk attitude: when a decision-maker gains access to an outside option, her behaviour becomes less risk-averse, and conversely, any observed decrease of risk-aversion can be explained by an outside option having been made available. We characterise the comparative statics of risk-aversion, delineating how effective risk attitude (i.e. actual choice among risky prospects) varies with the outside option and with the decision-maker's 'true' risk attitude. We prove that outside options are special: among transformations of a decision problem, those that amount to adding an outside option are the only ones that always reduce risk-aversion.
Ludvig Sinander
Gregorio Curello, Mark Whitmeyer and I have just completed a first draft of a paper uncovering a close relationship between outside options and risk attitude. We are very excited about this paper & think some of you may be interested. Comments very welcome!
https://arxiv.org/abs/2509.14732
Abstract: We uncover a close link between outside options and risk attitude: when a decision-maker gains access to an outside option, her behaviour becomes less risk-averse, and conversely, any observed decrease of risk-aversion can be explained by an outside option having been made available. We characterise the comparative statics of risk-aversion, delineating how effective risk attitude (i.e. actual choice among risky prospects) varies with the outside option and with the decision-maker's 'true' risk attitude. We prove that outside options are special: among transformations of a decision problem, those that amount to adding an outside option are the only ones that always reduce risk-aversion.
Ludvig Sinander
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