risk-neutral

Also, the theoretical revenue-equivalence of first-price and second-price auctions depends on the assumptions that buyers are risk-neutral and that they have independent, private valuations.

eBay, Fun, and Social Waste, Arnold Kling | EconLog | Library of Economics and Liberty 2009

The risk-neutral model assumes, for example, that people are indifferent between $5 for sure and a 50/50 chance of $0 or $10.

eBay, Fun, and Social Waste, Arnold Kling | EconLog | Library of Economics and Liberty 2009

Anyway, the upshot is that in 1st-price auctions, risk-averse bidders bid higher (in equilibrium) than risk-neutral buyers do, so the expected revenue for the seller is greater.

eBay, Fun, and Social Waste, Arnold Kling | EconLog | Library of Economics and Liberty 2009

Option pricing and general valuation of contingent claims -- partial differential equations and martingales (I would argue that you really don't understand a risk-neutral pricing argument unless you can approach it from both angles).

Math and Economics, Arnold Kling | EconLog | Library of Economics and Liberty 2009

If he were risk-neutral, it would tell us he expects career earnings of less than $1.25 million (which is the expected value implied by selling his future at this price).

With the Stock Market Down, Perhaps Diamonds Are a Good Place to Invest - Freakonomics Blog - NYTimes.com 2008

If he were risk-neutral, it would tell us he expects career earnings of less than $1.25 million (which is the expected value implied by selling his future at this price).

With the Stock Market Down, Perhaps Diamonds Are a Good Place to Invest - Freakonomics Blog - NYTimes.com 2008

Let Al and Bob by rational, risk-neutral actors, both be subject to some rule, and let the cost of complying with the rule be $10 while the penalty for non-compliance is $15.

The Volokh Conspiracy » Positive feedback and strategic enforcement 2009

Let Al and Bob by rational, risk-neutral actors, both be subject to some rule, and let the cost of complying with the rule be $10 while the penalty for non-compliance is $15.

The Volokh Conspiracy » Positive feedback and strategic enforcement 2009

Thus, I hold that a safety net is necessary, to the extent that the safety net makes the public risk-neutral in making saving vs. consumption decisions.

Kotlikoff Anecdote, Bryan Caplan | EconLog | Library of Economics and Liberty 2009

Since Al is risk-neutral, he values that ½ chance of a $15 penalty at $7.50.

The Volokh Conspiracy » Positive feedback and strategic enforcement 2009