In this article, a general class of deterministic transformations that can be interpreted as changes in risk are identified. This provides a fourth characterization of a Rothschild-Stiglitz increase in risk. In addition, a particular subclass of these transformations, termed simple transformation, is shown to be well suited for comparative static analyses. This subclass contains as a special case the linear transformation used so often in the literature. A theorem is presented that generalizes the known comparative static results for large as well as small changes in risk. Copyright 1989 by Kluwer Academic Publishers
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Gene M. Grossman & Giovanni Maggi, 1998.
"Diversity and Trade,"
NBER Working Papers
6741, National Bureau of Economic Research, Inc.
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Gene M. Grossman & Giovanni Maggi, 2000.
"Diversity and Trade,"
American Economic Review,
American Economic Association, vol. 90(5), pages 1255-1275, December.
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