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Risk preferences and transaction costs

de Meza, David and Dickinson, P. T. (1984) Risk preferences and transaction costs. Journal of Economic Behavior and Organization, 5 (2). pp. 223-236. ISSN 0167-2681

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Identification Number: 10.1016/0167-2681(84)90019-2


Kahneman and Tversky have collected evidence of behavior in the face of risk which is seemingly at odds with von Neumann-Morgenstern expected utility theory. To account for their observations they propose a new approach which they christen ‘Prospect Theory’. This note argues that introducing transactions costs into expected utility theory systematically accounts for many empirical results without unduly straining the conventional analysis. It may therefore be premature to abandon expected utility theory.

Item Type: Article
Official URL:
Additional Information: © 1984 Elsevier Science Publishers B. V.
Divisions: Management
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Date Deposited: 13 Apr 2011 10:13
Last Modified: 19 Feb 2019 23:17

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