Background risk and quantum calculus

Article type: Research Article

Authors: Tapiero, Oren J.

Affiliations: Université Paris 1 Panthéon-Sorbonne (LabEx-ReFi), Paris, France. E-mail: [email protected]

Abstract: Infinitesimal calculus is heavily used in decision making analysis. This paper demonstrates that the application of quantum calculus in analysing preferences choice directly introduces background risk and its effects on risk-aversion, subjective probabilities and moment preferences. Quantum calculus provides another approach to the mathematical treatment of decision making, namely analysis of utility preferences.

Keywords: q-calculus, utility, background risk, unfair lotteries

DOI: 10.3233/RDA-130095

Journal: Risk and Decision Analysis, vol. 4, no. 4, pp. 291-301, 2013