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Precautionaryriority Effort Investment under Cross Risk Aversion

Author

Listed:
  • Tao Yuqing

    (Department of Teacher Education, Maanshan Teacher’s College, Ma’anshan, 243041, China)

  • Mei Jie

    (Class 6, Grade 1, No. 1 Middle School, Affiliated to Central China Normal University, Wuhan, China)

  • Cheng Wen

    (Department of Risk Management, China Huarong Asset Management Co., Ltd, Beijing, 100033, China)

  • Zou Sijie

    (Department of Finance, Shandong Branch, China Three Gorges New Energy Co., Ltd, Jinan, 277000, China)

Abstract

This paper deals with the effort problem under multiple risks in bivariate utility setting. We identify preference conditions to insure positive or negative effect of a background variable uncertainty on effort in the presence of other risks. We allow for the simultaneous presence of wealth and background variable uncertainties. We investigate the joint effect of two-source uncertainties on effort when two risks are either small or positive quadrant dependent. Our work extends the previous model of effort to bivariate utility framework and presents new insights into the issue of optimal effort under uncertainty.

Suggested Citation

  • Tao Yuqing & Mei Jie & Cheng Wen & Zou Sijie, 2019. "Precautionaryriority Effort Investment under Cross Risk Aversion," Journal of Systems Science and Information, De Gruyter, vol. 7(4), pages 344-358, August.
    • Handle: RePEc:bpj:jossai:v:7:y:2019:i:4:p:344-358:n:4
    DOI: 10.21078/JSSI-2019-344-15
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    References listed on IDEAS

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