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On the Effect of Risk Aversion in Two-Person, Two-State Finance Economies

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Author Info
Caroline Berden (Maastricht University)
Hans Peters (Maastricht University)
Abstract

The effect of replacing an agent in a two-person two-state finance economy by a more risk averse agent is studied. It is established under which conditions the other agent benefits or looses in equilibrium from dealing with a more risk averse agent. If one agent becomes more risk averse, then the equilibrium allocation moves towards that agent's certainty line. Whether or not that is beneficial for the other agent depends on the location of the endowment point.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1394&context=bejte
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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 7 (2008)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejtec:v:7:y:2008:i:1:n:47

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Related research
Keywords: two-person two-state finance economies; risk aversion;

Find related papers by JEL classification:
D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Caroline Berden & Hans Peters, 2006. "On the Effect of Risk Aversion in Bimatrix Games," Theory and Decision, Springer, vol. 60(4), pages 359-370, 06. [Downloadable!] (restricted)
  2. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, December.
  3. Chiaki Hara & James Huang & Christoph Kuzmics, 2006. "Representative Consumer’s Risk Aversion and Efficient Risk-Sharing Rules," KIER Working Papers 620, Kyoto University, Institute of Economic Research. [Downloadable!]
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This page was last updated on 2009-12-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.