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Putting Risk in Its Proper Place
This paper examines preferences toward particular classes of lottery pairs. We show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expectedutility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the n th derivative of the utility function. What makes our characterization appealing is its simplicity, which seems particularly amenable to experimentation.
Relative Risk Aversion in Comparative Statics: Comment
Relative Risk Aversion in Comparative Statics: Comment
Minimum and Maximum Prices, Uncertainty, and the Theory of the Competitive Firm
Even (Mixed) Risk Lovers are Prudent
The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that—contrarily to a priori beliefs—risk lovers are prudent and are willing to accumulate precautionary savings.