The safety first expected utility model: Experimental evidence and economic implications

Haim Levy, Moshe Levy*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

33 Scopus citations


Roy's [Roy, A., 1952. Safety first and the holding of assets. Econometrica 20 (3), 431-449] safety first criterion advocates the minimization of the probability of outcomes below a certain "disaster" level. This paper examines safety first theoretically and experimentally. We find that safety first plays a crucial role in decision-making, inducing choices that cannot be explained by, and even contradict, risk-aversion, Prospect Theory, and loss-aversion in general. Yet, safety first alone cannot explain individual choice. Therefore, we propose an expected utility - safety first (EU-SF) model where decisions are made based on a weighted average of the safety first criterion and standard expected utility maximization. We experimentally estimate these relative weights, and discuss their economic implications.

Original languageAmerican English
Pages (from-to)1494-1506
Number of pages13
JournalJournal of Banking and Finance
Issue number8
StatePublished - Aug 2009


  • Asset allocation
  • CAPM
  • Equity premium
  • Loss aversion
  • Risk aversion
  • Safety first
  • Stochastic dominance


Dive into the research topics of 'The safety first expected utility model: Experimental evidence and economic implications'. Together they form a unique fingerprint.

Cite this