A MIXED FAN HYPOTHESIS AND ITS IMPLICATIONS FOR BEHAVIOR TOWARD RISK

In order to accommodate recent experimental evidence which questions the validity of the fanning out hypothesis, a mixed fan hypothesis is proposed. The hypothesis combines fanning out for the less-preferred region of probability triangles with fanning in for the more preferred region, and is defined over general probability spaces. The relevance of fanning hypotheses for economic analysis is illustrated with an asset demand example, and a new method for testing for fanning behavior is proposed.