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Prudence probability premium

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  • Jindapon, Paan

Abstract

Prudence probability premium is defined in the risk apportionment model (Eeckhoudt and Schlesinger, 2006). For an increase in downside risk, we show sufficient conditions for comparing the probability premiums between two individuals when the apportioned risk is small and large.

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File URL: http://www.sciencedirect.com/science/article/B6V84-50PVFV1-1/2/155496fd27ae76b766c9c0bfc99115b7
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 109 (2010)
Issue (Month): 1 (October)
Pages: 34-37

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Handle: RePEc:eee:ecolet:v:109:y:2010:i:1:p:34-37

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Probability premium Risk aversion Downside risk Prudence Risk apportionment;

References

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  1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  2. Ross, Stephen A, 1981. "Some Stronger Measures of Risk Aversion in the Small and the Large with Applications," Econometrica, Econometric Society, vol. 49(3), pages 621-38, May.
  3. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, vol. 96(1), pages 280-289, March.
  4. Chiu, W.Henry, 2005. "Degree of downside risk aversion and self-protection," Insurance: Mathematics and Economics, Elsevier, vol. 36(1), pages 93-101, February.
  5. CRAINICH, David & EECKHOUDT, Louis, 2007. "On the intensity of downside risk aversion," CORE Discussion Papers 2007088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Jindapon, Paan & Neilson, William S., 2007. "Higher-order generalizations of Arrow-Pratt and Ross risk aversion: A comparative statics approach," Journal of Economic Theory, Elsevier, vol. 136(1), pages 719-728, September.
  7. Menezes, C & Geiss, C & Tressler, J, 1980. "Increasing Downside Risk," American Economic Review, American Economic Association, vol. 70(5), pages 921-32, December.
  8. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279.
  9. Modica, Salvatore & Scarsini, Marco, 2005. "A note on comparative downside risk aversion," Journal of Economic Theory, Elsevier, vol. 122(2), pages 267-271, June.
  10. EECKHOUDT, Louis & SCHLESINGER, Harris, . "On the utility premium of Friedman and Savage," CORE Discussion Papers RP -2206, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Keenan, Donald C. & Snow, Arthur, 2009. "Greater downside risk aversion in the large," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1092-1101, May.
  12. Keenan, Donald C & Snow, Arthur, 2002. " Greater Downside Risk Aversion," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 267-77, May.
  13. Keenan, Donald C. & Snow, Arthur, 2010. "Greater prudence and greater downside risk aversion," Journal of Economic Theory, Elsevier, vol. 145(5), pages 2018-2026, September.
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Cited by:
  1. Richard Watt, 2011. "A note on greater downside risk aversion," ICER Working Papers 17-2011, ICER - International Centre for Economic Research.

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