Prudence, temperance, edginess, and risk apportionment as decreasing sensitivity to detrimental changes
AbstractThis paper shows that the notions of prudence, temperance, edginess, and, more generally, risk apportionment of any degree are the consequences of the natural idea that the sensitivity to detrimental changes should decrease with initial wealth. In the setting of Epstein and Tanny (1980), this turns out to be equivalent to the supermodularity of the expected utility for some specific 4-state lotteries.
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Bibliographic InfoArticle provided by Elsevier in its journal Mathematical Social Sciences.
Volume (Year): 60 (2010)
Issue (Month): 2 (September)
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Web page: http://www.elsevier.com/locate/inca/505565
Expected utility Wealth effect Supermodularity Stochastic dominance;
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